TS 

ai 5 5 



REPORT 



OF THE 



FEDERAL TRADE COMMISSION 



ON 



COMMERCIAL WHEAT FLOUR 
MILLING 



September 15, 1920 




WASHINGTON 
GOVERNMENT PRINTING OFFICE 

1920 



^%|^' 




Glass. 
Book 






X 



REPORT 

OF THE 

FEDERAL TRADE COMMISSION 

ON 

COMMERCIAL WHEAT FLOUR 
MILLING 



September 15, 1920 




WASHINGTON 
GOVERNMENT PRINTING OFFICE 

1020 



^3 






y^\t;%^ 



FEDERAL TRADE COMMISSION. 



Victor Murdock, Chairman. 
Huston Thompson. 
William B. Colver. 
Nelson B. Gaskill. 
John Garland Pollard. 

J. P. YoDER, Secretary. 




ijuv iy ,y2y 



additional copies 

OF THIS PUBLICATION MAT BE PROCURED FROM 

THE SUPERINTENDENT OF DOCUMENTS 

GOVERNMENT PRINTINa OFFICK 

WASHINGTON, D. C. 

AT 

10 CENTS PER COPY 



CONTENTS. 



Letter of transmittal 7 

Chapter I. — General Survey. 

Sec. 1. Origin and scope of the report 11 

Sec. 2. Commercial importance of wheat flour 11 

Sec. 3. Production and consumption of wheat flour in the United States 12 

Production 12 

Consumption 14 

Sec. 4. Flour mills and flour milling in the United States 15 

Development of the flour and grist mill industry 15 

Neighborhood mills 15 

Commercial mills 16 

Localization of commercial milling 17 

Northwestern Selling Area - 19 

Southwestern Selling Area 21 

Pacific Selling Area 22 

Eastern Buying Area 24 

Southern Buying Area 25 

Central Neutral Area 26 

Southeastern Neutral Area 28 

Western Neutral Areas 29 

Small Production Areas 29 

Wheat crop, flour production, and population of the United 

States, and of certain areas compared 29 

Concentration in the milling industn,^ 33 

Concentration and competition 38 

Competitive methods 39 

Sec. 5. Millers' Associations ? 39 

Millers' National Federation 40 

Community Millers' Association of America 40 

The Millers' Export Association (Inc.) 41 

Other associations 41 

Chapter II. — Costs, Prices, and Profits. 

Sec. 1. Prices of wheat flour 42 

Sec. 2. Cost of selling flour 50 

Mill sales 50 

The flour trade 51 

Grocers' flour trade 51 

Car-lot flour jobbing 51 

Less-than -car-lot jobbing 52 

Sec. 3. Flour-mill accounts 54 

Sec. 4. Scope of inquiry into costs and profits 56 

Sec. 5. The mills covered 57 

Territorial location and kind of wheat used 57 

Consumption of wheat and output of flour. , 59 

3 



4 CONTENTS. 

Sec. 6. Investment, earnings, and distribution of earnings 62 

Sec. 7. Rate of return on investment 72 

Sec. 8. Sales and profit on sales 76 

Sec. 9. Average investment, receipts, cost plus interest, and profit per barrel 

of flour 78 

Average per barrel figures for the 37 companies 78 

Comparison of increases in the investment per barrel of the 37 

companies and of the different groups 82 

CJomparieon of advances in prices, or receipts per barrel, of the 37 

companies and of the different groups 84 

Comparison of cost plus interest per barrel of the 37 companies and 

of the different groups 86 

Comparison of profit per barrel of the 37 companies and of the 

different groups 87 

Sec. 10. Costs in wheat-flour milling 90 

Analysis of per barrel cost 90 

Cost of wheat 91 

Demand and supply factors affecting the miller's cost of 

wheat 91 

Wheat used per barrel of flour 97 

Cost of wheat per bushel 98 

Cost of wheat per barrel of flour 99 

Cost of packages 100 

Operating costs, including repairs and depreciation 100 

General and selling expenses per barrel of flour 101 

Operating, selling, and general expenses 102 

Sec. 11. Relative efficiency of flour- milling companies 103 

Sec. 12. Wheat-flour milling in Washington and Oregon 105 



LIST OF TABLES. 

Page. 
Table 1. Production of wheat flour in the United States, as reported by the 

census, 1889, 1899, 1909, and 1914 13 

2. Per capita consumption of flour in the United States, by fiscal years, 

1901-2 to 1917-18 14 

3. Development of merchant milling in the United States, as reported by 

the census, 1899, 1904, 1909, and 1914 15 

4. Number and production of commerical mills, by States, as reported 

by the census, 1909 and 1914 16 

5. Wheat crop, flour production, and population in the Northwestern 

Selling Area, 1899, 1904, 1909, 1914, and 1919 21 

6. Wheat crop, flour production, and population in the Southwestern 

Selling Area, 1899, 1904, 1909, 1914, and 1919 22 

7. Wheat crop, flour production, and population in the Pacific Selling 

Area, 1899, 1904, 1909, 1914, and 1919 23 

8. Wheat crop, flour production, and population in the Eastern Buying 

Area, 1899, 1904, 1909, 1914, and 1919 24 

9. Wheat crop, flour production, and population in the Southern Buying 

Area, 1899, 1904, 1909, 1914, and 1919 26 

10. Wheat crop, flour production, and population in the Central Neutral 

Area, 1899, 1904, 1909, 1914, and 1919 27 

11. Wheat crop, flour production, and population in the Southeastern 

Neutral Area, 1899, 1904, 1909, 1914, and 1919 28 

12. Wheat crop, flour production, and population of the United States 

in 1899 and 1919, together with the different percentages of those 
totals found in the more important areas shown on Map II 30 

13. Classification of commercial flour mills according to output and 

location, 1904, 1909, and 1914 34 

14. Retail, export, and wholesale prices of wheat flour, millers' receipts 

for flour and feed, millers' cost of wheat, and farmers' receipts for 
wheat, per unit figures, 1913-14 to 1917-18 43 

15. Average receipts, costs, gross margin, expense, and profit on certain 

New York jobbers' sales of wheat flour in less than carload lots, 

by years, 1914 to 1918 53 

16. Wheat consumption, flour and feed production, and flour and feed 

sales of the 37 selected companies, mill years 1913-14 to 1917-18. . 59 

17. Deductions from and additions to the investment as shown in the 

original company accounts 62 

18. Revised investment in the milling business at the beginning and end 

of each year, together with adjustments because of transactions not 
pertaining to the milling business, and additions through the mill 
earnings of the year, less distributions, by years, 1913-14 to 1917-18. 65 

19. Comparison of the results of mill operation and of investment items 

as shown in the original accounts and in the Commission's revised 
statements 69 

20. Investment and rate of return on investment, by groups, and by 

years, 1913-14 to 1917-18 72 

21. Sales and per cent of profit on sales, by groups, and by years, 1913-14 

to 1917-18 76 

5 



LIST OF TABLES. 

Page. 

22. Average investment, receipts, cost plus interest, and profit per barrel 

of flour sold of the 37 companies, by years, 1913-14 to 1917-18 78 

23. Comparison of increases in the investment per barrel of the 37 com- 

panies and of the different groups, by years, 1913-14 to 1917-18. . . 82 

24. Comparison of advances in prices, or receipts per barrel, of the 37 

companies and of the different groups, by years, 1913-14 to 1917-18 . 84 

25. Comparison of cost plus interest per barrel of the 37 companies and of 

the different groups, by years, 1913-14 to 1917-18 86 

26. Comparison of profit per barrel of the 37 companies and of the differ- 

ent groups, by years, 1913-14 to 1917-18 87 

27. Analysis of the costs of the 37 companies in making and selling a 

barrel of wheat flour, by years, 1913-14 to 1917-18 90 

28. The wheat crop of the United States and quantities exported, con- 

sumed, and left in stock, by years, 1913-14 to 1917-18 (in millions 

of bushels) 92 

29. Analysis of the consumption of wheat in the United States, by years, 

1913-14 to 1917-18 (in millions of bushels) 95 

30. Wheat costs of the 37 companies, by years, 1913-14 to 1917-18 97 

31. Cost of packages per barrel of flour of the 37 companies by groups and 

by years, 1913-14 to 1917-18 100 

32. Operating costs per barrel of flour, including repairs and depreciation, 

of the 37 companies, by groups and by years, 1913-14 to 1917-18. 100 

33. General and selling expenses per barrel of flour of the 37 companies, 

by groups and by years, 1913-14 to 1917-18 101 

34. Total operating, selling, and general expenses per barrel of flour of 

the 37 companies, by groups and by years, 1913-14 to 1917-18 102 

35. Average investment, earnings, and rate of profit, together with costs, 

profits, and investments per barrel of 38 wheit-flour milling com- 
panies grouped according to volume of sales, five-year period, • 
1913-14 to 1917-18 104 



LIST OF EXHIBITS. 



Exhibit 1. Tonnage of flour — Railroads of United States 107 

II. Estimated percentages of soft and hard winter, soft and liarJ com- 
mon spring, and durum wheat grown in the 36 leading wheat- 
producing States in the United States, crop of 1918 108 

III. Progress of population, wheat crop, and flour production for different 

sections indicated by percentage relations to totals for the United 
States 108 

IV. Millers' associations and millers' clubs 110 

V. Proportion of hard and soft wheat used by certain mill- iii (lilTerent 

localities, crop year 1916-17 116 

VI. Quality and weight of wheat by States, crop years 1912 to 1918. 117 
VII. Analyses of the cost of making and selling a barrel of wheat flour, 

by groups and by years, 1913-14 to 1917-18 118 

MAPS. 

Map I. Map of the United States showing the wheat flour zone set off from areas 

of small wheat flour output 17 

II. Wheat flour production and distribution areas facing . . 20 



LETTER OF TRANSMITTAL. 



Federal Trade Commission, 
Washington, Se'ptemher 16, 1920. 
To THE Congress of the United States: 

There is submitted herewith a report of the Federal Trade Com- 
mission on commercial wheat-flom' milling. This inquiry had its 
origin in connection with the general food investigation made by the 
Commission, but was later continued as a separate inquiry. 

The wheat-flour milling industry has long been one of the most 
important in the United States. The value of its flour output alone, 
in the eight months ending vaih. March, 1920, considerably exceeded 
a billion dollars. The growth of the industry has been relatively 
slow, however, for many years. In 1899 the mills produced a little 
over 100,000,000 barrels of flour; in 1919 about 120,000,000 barrels. 
While the wheat-flour output increased less than 20 per cent, popu- 
lation grew at twice that rate, cotton used by the cotton mills of the 
country more than doubled, and there was a threefold increase in 
the production of pig iron. 

Although there are still thousands of small neighborhood mills in 
the United States, and although the largest milling concern in the 
country has never produced much, if any, over 10 per cent of the 
total output, the tendency toward concentration in the wheat-flour 
industry is notable. The crowding of consumers into limited areas 
incidental to the great industrial development of the country has 
created a situation in which a demand for standardized brands of 
wheat flour has been developed. Such flour can be produced suc- 
cessfully only by milling concerns of large size whose wheat supply 
enables them to maintain the quality of their flour practically un- 
changed from year to year. Concentration has been further advanced 
by the increased production of hard wheat on the high plains west 
of the Mississippi River. The flour made from this wheat by the 
western mills satisfies the demands of consumers in the great indus- 
trial centers much more fully than does the flour produced from the 
soft wheat grown in other sections of the country. The low price of 
wheat produced in the Pacific Northwest has also developed a 
surplus output of wheat flour in that section, which finds its market 
principally in California and abroad. 

This concentration in the wheat-flour industry has already pro- 
gressed so far that 10 of the larger milling concerns probabl}^ have 

7 



8 COMMERCIAL, WHEAT-FLOUR MILLING. 

suflicient capacity to produce over half of the wheat flour used in the 
United States. Its rate of progress in recent years is indicated by 
the fact that in the 10 years from 1904 to 1914, according to census 
statistics, one out of every three mills having an annual output of 
5,000 to 20,000 barrels went out of business, their number decreasing 
from 2,123 to 1,377. On the other hand, the number of mills making 
over 100,000 barrels increased from 166 to 218, then- output in 1914 
amounting to over 60 per cent of the total for the entire country. 

During the 20 years ending with 1914 the price of wheat flour did 
not advance nearly so much as the average price of other commodities. 
According to census statistics, the average value of wheat flour at 
the mills in 1889 was $4.33; in 1899, $3.35; and 1909, $5.20; but in 
1914 it had dropped back to $4.67. In the five years from 1913-14 
to 1917-18, the average price of flour sold by the companies 
covered in the present report increased from $4.15 to $10.22 per 
barrel — an advance of 146 per cent. During the same period, 
according to estimates of the Department of Agriculture, the average 
price received by farmers for wheat advanced 1 60 per cent, while price 
data of the Department of Labor indicate an increase of only 118 
per cent in retail prices of flour. It should be noted also that for 
the same companies the millers' combined receipts for flour and feed 
increased only 134 per cent. The wholesale price of flour has con- 
tinued to increase, and by the end of 1919 its advance over the low 
level of the nineties was relatively greater than the average advance 
for aU other commodities. Furthermore, the retail price of flour 
advanced during 1919 at practically three times the average rate for 
other foods. 

Incomplete data gathered by the Commission indicate that up to 
1918, profits of flour jobbers, including proprietors' salaries, ranged 
from 10 cents to 20 cents per barrel, but that many jobbers probably 
made twice their ordinary profit in 1917. The average expense in 
jobbing a barrel of flour apparently increased from about 25 cents 
before the war to about 40 cents in 1917 and 1918. 

The circumstances under which this inquiry into the wheat-flour 
industry was carried on made it advisable to limit the report largely 
to the operations of 37 companies whose annual sales in 1913-14 
amounted to 38,450,000 barrels, in 1915-16 to 43,430,000, and in 
1917-18 to 34,659,000. Their sales, however, are so widespread and 
are such a large factor in the interstate flour trade that their prices 
may be taken as representative of conunerciai milling operations 
ttu'oughout the United States. Ten of these concerns included in what 
is referred to hereafter as the Northwestern group used hard spring 
wheat almost exclusively; 13 in the Southwestern group used hard 
winter wheat for 85 per cent of then output, and 14 in the Eastern 



LETTER OF TRANSMITTAL.. 9 

group divided their consumption quite equally between hard and 
soft wheat. 

The accounting records, even of the 37 selected companies, were 
not found to be wholly satisfactory for use in determining past 
'developments or present conditions in the industry. After careful 
revision it was possible, however, to obtain figures for the 37 com- 
panies and for the different groups referred to above which can be 
used with confidence in comparing different years and different 
groups of companies. 

On flour sales amounting to $159,656,875 the 37 companies made a 
profit of $5,512,163 in 1913-14, and in 1917-18 on sales amounting 
to $354,192,287 their profit was $22,440,858.* The rate of profit on 
sales increased from 3.4 per cent in 1913-14 to 6.5 per cent in 1916-17 
and dropped back to 5.3 per cent in 1917-18. The decrease in the 
last year was due in part to sales to the Government at less than cost. 

This remarkable development of the business of the 37 companies 
resulted in an increase in their investment from $43,460,780 at the 
beginning of the five years to .$69,528,605 at its end. These concerns 
not only made this increase of 60 per cent in their investment but 
also paid out $36,716,403 in dividends and Federal taxes and for 
outside investments. 

The average annual earnings of the Northwestern group on its 
average investment for the five years were 24.4 per cent; those of the 
Southwestern, 23.5 per cent; but those of the Eastern group amounted 
to only 15.8 per cent. The profit of the 37 companies w^as over twice 
as large in the last two years as in the first three. In 1916-17 their 
return on investment, 38.4 per cent, was over three times as large as 
in 1913-14. In the single year 1916-17 the profit of the Northwestern 
group amounted to 44.7 per cent and in 1917-18 that of the South- 
western group was 42.6 per cent. In striking contrast with these 
figures, the earnings of the Eastern group in 1915-16 were only 6.5 
per cent. In 1917-18, however, the profit of that group had increased 
to 30.8 per cent. 

Segregating wheat-flour costs from costs of other products as 
accurately as possible, and allowing a credit from feed sales of 76 
cents in the first year and $1.29 in the last, the cost per barrel of 
flour for the 37 companies increased from $3.99 in 1913-14 to $9.68 
in 1917-18. In the first year mentioned this cost included $3.96 for 
wheat and 79 cents for all other items and the last year $9.72 for 
wheat and $1.25 for other items. The increase in cost of wheat 
was $5.76 and that in the cost of all other items 46 cents. The 
cost of wheat advanced 146 per cent during this period, packages 
74 per cent, mill operating costs 68 per cent, and general and selling 

♦After this report -went to press the Commission learned that $1,297,384.05 of this $22,440,858 was 
paid to the Grain Corporation as excess profits. 



10 COMMERCIAL WHEAT-FLOUR MILLING. 

expenses 37 per cent. Tliis great increase in the cost of wheat is 
explained largely by the fact that the average crop in 1916 and 1917 
was practically 400,000,000 bushels smaller than that in 1915 and that, 
in spite of greatly decreased exports, wheat on hand at the end of the 
crop years feU oflf 122,000,000 bushels in 1916-17 and 34,000,000 
bushels in 1917-18. On July 1, 1916, estimated stocks of wheat 
in the United States amounted to 177,000,000 bushels and two 
years later to only 21,000,000 bushels. 

Until 1917-18 miscellaneous milling was a negligible factor in the 
operations of the 37 companies, but on account of their increased 
output of coarse grain products in that year a satisfactory separation 
of wheat-flour investment from the increased miscellaneous milling 
investment would have been desirable but was impossible. There- 
fore, wheat-flour profits and miscellaneous milling profits were 
necessarily combined in ascertaining the rate of return on investment 
for that year. Average investment per barrel for the 37 companies 
thus determined increased from $1.14 in 1913-14 to $1.90 in 1917-18 
and profit per barrel from 14 cents to 65 cents. 

In 1913-14 the per barrel investment of the Northwestern group 
was 14 per cent below and that for the Eastern group 53 per cent 
.above the average for the 37 companies, but in 1917-18 the invest- 
ment for the Northwestern group was only 6 per cent below and that 
for the Eastern group only 14 per cent above. The investment for 
the Southwestern group held an intermediate position in all years 
Costs and prices per barrel for the different groups showed this same 
tendency to approach each other during the five-year period. 

The data used in this report on the whole seem to indicate that 
milling companies of less than 300,000 barrels' annual output are 
relatively less profitable than the larger companies. Among the com- 
panies having an output over 300,000 barrels, those with an output 
below 1,000,000 compare favorably with those having an output in 
excess thereof. 

Respectfully, 

Victor Murdock, Chairman. 

Huston Thompson. 

William B Colver. 

Nelson B. Gaskill. 

John Garland Pollard. 



COMMERCIAL WHEAT-FLOUR MILLING. 



Chapter I. 
GENERAL SURVEY. 

Section 1. Origin and scope of the report. 

This inquiry had its origin in connection with the general food 
investigation made by the Commission, but was later continued as a 
separate inquiry. 

It includes a general survey of flour milling in the United States 
and a discussion of changes in prices, costs, and profits during the 
years 1913-14 to 1917-18, based on data collected from the records 
of a relatively small number of large milling companies. These 
mills, however, produce so large a part of the flour sold in the com- 
mercial flour markets of the United States that prices of flour through- 
out the country are greatly influenced thereby. The milling situa- 
tion on the Pacific coast is also discussed briefly. 

Section 2. Commercial importance of wheat flour. 

Wheat flour has always held an important place not only in the 
domestic but also in the foreign commerce of the United States. 
Available data indicate that during the last 20 years the mill value 
of the annual output has ranged from $300,000,000 to over $1,000,- 
000,000, and m recent years consumers in the United States have 
paid much in excess of the latter amount for their supplies of wheat 
flour. ^ 

The commercial importance of flour indicated by this large volume 
of sales is the more significant because it is an article of general 
consumption and must consequently be carried in stock by a very 
large number of merchants. The increasing concentration of flour 
mills in recent years has involved large and constantly mcreasing 
expenditures for freight, storage, and cartage. Data from the 
Interstate Commerce Commission indicate that fully 80 per cent 
of aU flour now made is shipped by rail (see Exhibit I). The con- 
sumer must necessarily pay these increased charges. 

' See United States census statistics for the flour and grist mill industry and the Northwestern Miller, 
Jan. 7, 1920, p. 56. 

11 



12 COMMERCIAL, WHEAT-FLOUR MILLING. 

The average annual exports of flour and of wheat by decades for 
the last 50 years, as shown m the following statement,* indicate the 
importance of the foreign demand for these products: 



Fiscal year*. 


Flour. 


Wheat. 


1870-1879 .. 


$23,633,151 
46,533,323 
63,381,926 
62,231,967 

104,396,359 


$68,680,285 


1880-1889 


97,788,699 


1890-1899 


80,442,686 


1900-1909 


66,723,817 


1910-1919 


162,792,450 







The average figures by decades do not bring out the advantage 
to the United States of this foreign market in years when the wheat 
crop is much in excess of domestic requirements. As early as 1892 
flour exports amounted to $75,000,000. This figure was dupU- 
cated in the following year, but was not exceeded until the opening 
year of the European War, 1914-15. For over 10 years the general 
tendency was for the wheat crop to shrink to the level of home con- 
sumption, and in the fiscal year 1905 exports of flour amoimted to 
only $40,000,000 — less than they had been in any year since 1886. 
"Wheat exports also reached the very low amount of $4,000,000 in 
that year. The very small exports of flour and wheat in 1905 were 
due to the small crop — 552,000,000 bushels — in the preceding year. 
This was less than had been raised in 1891 before hard winter wheat 
had become such an important part of the total crop. 

A fairly steady increase in the hard winter-wheat crop of Kansas 
and neighboring States, together with the recent revival in soft- 
wheat production in the North Central States, has been principally 
responsible for the increase in the wheat harvest, which by three- 
year averages of official estimates was as follows: ^ 

Bushels. 

1897-1899 621, 277, 000 

]902-1904 620, 095, 000 

1907-1909 660, 689, 000 

1912-1914 794, 888, 000 

1917-1919 831, 581, 000 

This increase in the available supply of wheat made it possible to 
export $428,000,000 * worth of wheat and flour in the fiscal year 
1915, not far from 10 times the amount exported 10 years earlier 
and equal to a sixth of the total exports of domestic products. 

Section 3. Production and consumption of wheat flour in the United 
States. 

Production. — Definite information as to the flour output of the 
United States is confined to the reports of the Bureau of the Census 

2 Statistical Abstract of the United States, 1918, p. 787; Monthly Summary of Foreign Commerce. June, 
1919, p. 33. 

> Department of Agriculture estimates. The department publishes revised estimates for some of these 
years, but the series ol estimates referred to is considered the best for comparisons covering the 20 years. 

« Statistical Abstract, 1918, pp. 784, 787. 



GENERAL SURVEY. 



13 



and the United States Grain Corporation. The census reports give 
the number of barrels and value of flour produced in the census 
years 1889, 1899, and 1909. They also furnish the same information 
as to the output of merchant mills for the census years 1899, 1904, 
1909, and 1914.^ The output in barrels and the bushels of wheat 
used each year is shown in the following table: 

Table 1. — Production of wheat flour in the United States, as reported by the Census, 1889, 

1899, 1909, and 1914-^ 





Bushels of 
wheat used. 


Barrels of flour 
produced. 


Bushels 
used per 
barrel. 


All mills: 

1889 


385, 749, 798 
489, 914, 004 
503, 468, 556 

471, 306, 986 
494, 095, 083 
496,480,314 
545, 728, 431 


80,948,977 
Irti, 524, 094 
107, 108, 461 

99, 763, 777 
104,013,278 
105, 756, 645 
116,403,770 


4.77 


1899 


4.78 


1903 


4.70 


Merchant mills: 

1891 


4.72 


1904 


4.75 


190J 


4.69 


1914 


4.69 







1 Data for 1889 taken from Census Bnlletin, Flouring and Grist Mill Products, 1902, pp. 9 and 13; for 
1899, 1904, and 1909, Census Bulletin, Statistics for the Flour -mill and Gristmill Industry, 1909, p. 13; 
for 1914, Census of Manufactures, Flour -mill and Grist mill Products, 1914, p. 12. 

The Grain Corporation reports show a production of 115,373,723 
barrels in 1917-18, 121,130,000 barrels in 1918-19, and 121,636,000 
barrels in the eleven months ending May 28, 1920.® 

The figures in the table above are, of course, open to the objection 
that the census years may not be typical years. They, however, 
probably warrant the statement that in the 25 years following 1890 
flour production in the United States increased between 40 and 50 
per cent. Compared with other data they indicate that wheat- 
flour milling made relatively slow progress. They show, for exam- 
ple, an increase of only 41 per cent in bushels of wheat used in flour 
mills between 1889 and 1914. But over the same period popula- 
tion increased 61 per cent, bales of cotton used in American cotton 
mills, 159 per cent; the output of pig iron over 200 per cent, and 
that of coal over 250 per cent.'' 

One of the most interesting facts brought out by the table is that, 
taking wheat the way he buys it and the way he mills it, the Ameri- 
can miller is able, year after year, to make a barrel of flour from 
4.7 bushels. The maximum consumption, 4.77 bushels in 1889, is 
less than 2 per cent above the minimum, 4.69 bushels, shown for 
merchant mills in 1909 and 1914. 

'The Census of 1870 reported 32,079,144 barrels of flour made in merchant mills. Such evidence as is 
available indicates that the figure would be considerably larger if on a comparable basis with the figures 
in the table. For this reason it was not included in the table. No flour output was reported by the Cen- 
sus of 1880. Census, 1870, vol. 3, p. 599. 

• Grain and Flour Statistics During the War, United States Grain Corporation, p. 27; United States 
Grain Corporation Bulletin, dated June 8, 1920. 

» Statistical Abstract of the United States, 1918, pp. 776, 813, 814, and 818. 



14 



COMMERCIAL WHEAT-FLOUR MILLING. 



Consumption. — The people of the United States consume annually 
for all purposes about 1 barrel of flour per capita. It is not probable 
that consumption of flour in this country has ever been materially 
in excess of that amount for any considerable period. In some 
European countries, notably France and Belgium, per capita con- 
sumption of flour has been greater by about 50 per cent.* 

The statisticians of the Food Administration compiled data on the 
wheat supply of the United States and its uses for the purpose of 
determining the quantity of wheat consumed as flour in the United 
States. Comparisons of their compilation with census reports indi- 
cate that from 4 to 8 per cent of their figure for bushels of wheat con- 
sumed as flour is probably in reality wasted in storage and trans- 
portation and rejected as unfit for milling. In spite of this probable 
exaggeration of the actual figures their results are the best available 
estimate of per capita consumption of wheat as flour over a series 
of years. Consequently they have been used in the following table, 
together with their equivalents in barrels of flour. 

Table 2. — Per capita consumption of flour in the United States, by fiscal years, 1901-2 

to 1917-18. 



Year. 


Per capita con- 
sumption. 


Year. 


Per capita con- 
sumption. 




Bushels. 


Barrels. 


Bushels. 


Barrels. 


1901-2 


5.43 
5. OS 
5.34 
5.40 
5.55 
5.43 
5.20 
5.54 


1.13 
1.06 
1.11 
1 13 
1.16 
1.13 
1 OS 
1.15 


1909-10 


~5.C9 
5.02 
4.95 
4.94 
5.21 
4.82 
4.97 
4.70 
4.55 


1.06 


1902-3 


1910-11 


1.05 


1903-4 


1911-12 


1 03 


1904-5 


1912-13 


103 


1905-0 


1913-14 


1. 0'J 


1900-7 


1914-15 


1.00 


1907-8 


W15-1G 


1.04 


1908-9 


1916-17 


.98 




1917-18 

Average, 9 > ears 


.95 


Average, 8 years 


5.37 


1.12 


4.91 


1.03 







These figures are based on a series of estimates and are presented 
merely as approximations, which, over a series of years, however, 
show tendencies with sufficient accuracy for practical purposes. 
They leave little doubt, for example, that the per capita consump- 
tion of flour was about 1 barrel annually during the first decade of 
the present century — probably in most years somewhat more than 
that. They establish more certainly, how^ever, a tendency to decreas- 
ing consumption, which, together with the war emergency, resulted 
in an average for the second period covered by the table practically 
10 per cent lower than for the first. It would not be at all safe, 
however, to try to establish the degree of economy in flour consump- 
tion on account of the war by a comparison of the figures shown 
for recent years. 

' statistical Notes on Cereals, June, 1919. International Institute of Agriculture, p. 15. 



GEITEKAL SURVEY. 



15 



Section 4. Flour mills and flour milling in the United States. 

Development of the flour and grist mill industry. — From 
1850 to 1900, according to the census, investments in flour and grist 
mills (data for flour mills alone are not available) increased in round 
numbers from 54 to 219 million dollars. This fourfold increase in 
capital was accompanied by a threefold increase in wages from 6 to 
18 million dollars, an increase in value of output from 136 to 561 
millions, and in cost of materials from 113 to 476 millions. The 
greatest relative increase was in cost of materials, the least in cost 
of labor.' 

The number of mills reporting increased from 11,891 in 1850 to 
25,258 in 1900, but these figures have little significance, because the 
flour mills whose investment, product, etc., constituted a very large 
and increasing part of the preceding figures throughout the period 
may have constituted a much larger part of the total number of 
mills reporting in 1850 than in 1900. In the census of 1900 the 
segregation of flour mills from the other mills was undertaken, and 
it was found that of the 25,258 mills reporting only 13,188 made 
flour. Of the total number of mills 9,476 were merchant mills — 
that is, mills that buy cereals and sell flour and other cereal products. 
The progress of these merchant mills from 1899 to 1914 is shown in 
the following table. ^° 

Table 3. — Development of merchant milling in the United States as reported by the census, 
1899, 1904, 1909, and 1914. 



1904 



1900 



1914 



Number of estalilishinent.s 

Person? engaged in the industry. 

Capital 

Salaries and wages 

Salaries 

Wages . . . 

Kent and ta ws 

Cost of materials 

Valuri of products 

Value added by manufactures * . . 
Grain ground, bushels ^ 



9,476 

(') 

$189,281,330 

$21,543,154 

$5,257,991 

$16,285,163 

(') 
$428, 116, 757 
$.'501,396,304 
S73,279,547 
729,061,820 



lOjO'Sl 
59,623 

§265,117,434 

$27,174,553 

$7,352,35/ 

$19, 822, 196 

2 $2,196,945 

$619,971,161 

$713,033,395 

$93,062,234 

754,945,729 



$349 
$33 
$12 
$21 

"$2 
$767 
$S>?3 
S116 

800 



11,691 
66,054 
151,779 
981,153 
516, 767 
464,386 
754,128 
576, 479 
584,105 
007,926 
217,961 



10,788 
65,635 
$380,257,420 
$10,963,303 
$16,370,141 
$24,593,162 
'$3,798,482 
$702,270,021 
$877,679,709 
$125, 409, 688 
818,929,321 



' Figures not available. 

> Exclusive of internal-revenue taxes. 

•Incluiing internal-revenue taxes. 

< Value of proluci,s less cost of materials. 

' includes wheat, corn, rye, buckwheat, barley, and oats. 

Neighborhood mills. — The census bulletins for 1899 and 1909 
give some separate data for the small mills that grind for a toll, or 
charge, called custom mills. In 1899 their output was 3,760,317 
barrels; in 1909 only 1,351 ,816 barrels. But among the mifls classified 
by the census as merchant mills there are many that have no real 
standing in commercial flour markets. For example, in 1909 the 
output of 1,721 mills listed as merchant mills amounted to only 
661,839 barrels — not much more than a barrel per day for each mill. 

•Census Bulletin: Flouring and Grist Mill Products, 1902, pp. 3, 4. 

» Census of Manufactures, 1914, Flour-mUl and Gristmil! Products, p 3. 



16 



COMMERCIAX. WHEAT-FLOUR MILLING. 



In 1914 a group of 1,821 of these mills made only 717,020 barrels. In 
neither year was the average daily output per mill as much as one 
and one-half barrels. These mills may well be classed together with 
the custom mills as neighborhood mills. This entire group of neigh- 
borhood mills still numbers several thousand, but it made less than 2 
per cent of the country's output of flour in 1909. 

Commercial mills. — Excluding the neighborhood mills discussed 
on the preceding page, the census classification shows a group of 
mills numbering 6,413 in 1904 and decreasing to 5,055 in 1914, 
which, to distinguish them from the neighborhood mills, are termed 
commercial mills in this report. In all probability many of the 
5,055 mills included in this group in 1914 sell no flour outside their 
own immediate neighborhood, and if a close classification were pos- 
sible the number of mills whose output exercises any considerable 
influence in the commercial flour markets would be found to be very 
much less than 5,000. Nevertheless, the operations of flour jobbers, 
and cooperative marketing by the small mills themselves, is said to 
cause their accumulated offerings to influence the market in some 
degree at times. The number of commercial miUs thus classified, 
and their wheat-flour production in 1909 and 1914, are shown by 
States in the following table: 

Table 4, — Number and production of commercial mills, by States, as reported by the 

census, 1909 and 191A-'- 



State. 



1909 



Number 
of estab- 
lishments. 



Barrels 
produced. 



Number 
of estab- 
lishments. 



Barrels 
produced. 



Minnesota 

Kansas 

New York 

Illinois 

Ohio 

Missouri 

Texas 

Indiana 

Pennsylvania . . . 

Michigan 

Washin^on 

Tennessee 

Kentucky 

Wisconsin 

Nebraska 

Virginia 

California 

North Dakota... 

Oklahoma 

Oregon 

Iowa 

North Carolina. . 

Maryland 

Colorado 

South Dakota. . . 

Montana 

West Virginia. . . 

Idaho 

Utah 

Georgia 

Arkansas 

New Jersey 

All other States. 



248 

209 

165 

222 

527 

388 

84 

411 

585 

293 

60 

274 

303 

149 

189 

245 

54 

58 

77 

95 

122 

157 

156 

39 

76 

12 

101 

44 

56 

27 

38 

58 

99 



22,771,362 

10,879,028 

6,666,696 

6,369,296 

5,687,729 

5,633,384 

3,335, ?31 

4,770,061 

3,610,339 

3,393,296 

2,797,792 

2,965,687 

2,808,618 

3,468,815 

2,264,861 

1,842,774 

1,800,349 

1,8^3,146 

2,199,995 

1,357,393 

1,505,009 

729,624 

1,091,390 

975, 067 

965,970 

375,440 

608,953 

385,037 

458,498 

410, 120 

231,444 

261,421 

650,981 



211 

172 

143 

189 

461 

355 

80 

338 

534 

238 

57 

290 

286 

96 

168 

299 

49 

52 

56 

63 

92 

191 

127 

42 

63 

26 

92 

42 

61 

17 

41 

36 



27,117,914 

12, 772, 478 

8,492,489 

6,627,369 

5,667,605 

5,354,186 

4,085,185 

4,494,402 

3,857,993 

3,010,667 

3,760,873 

3,037,904 

2,696,843 

3,030,863 

2,375,810 

2,099,328 

1,778,345 

2,163,938 

2,068,536 

1,783,023 

1,473,196 

931,982 

1,073,760 

1,226,731 

919,443 

870,065 

485,699 

568,711 

500,722 

340,075 

283,878 

158,504 

57^8,233 



Total. 



5,621 



105,094,806 



5,055 



115,686,750 



I Census of Manufactures, 1914, Flour-mill and Gristmill Products, p. 15. 



GENEKAL. SURVEY. 17 

This table shows the relative importance of commercial milling in 
the different States, and affords interesting evidence of the country- 
wide extent of the decrease in number of mills. The only notable 
exceptions to this rule are two small groups of States — Virginia, 
North Carolina, and Tennessee in the South and Colorado, Montana, 
and Utah in the Rocky Mountain region. 

Localization of commercial milling. — During the first 100 
years of its history practically every neighborhood in the United 
States had its own mill grinding one or more different kinds of grains. 
For the past 40 years or more, however, the production of wheat 

Map I. 



MAP OF THE UNITED STATES 

showing the Wheat FlourZone setofffrom Areas of Small Wheat 

FlouK Output. 




t%^ AREAS OF SMALL 

WHEAT FLOUR OUTPUT 

POPULATION 28MILLION 

WHEAT PRODUCTION 36 . . BUl 

FLOUR • » 2.6 .. .. BBLS. 

PER CAPITA O.I BBLS. 



NOTE - The Wheat Flour Zone includes all States hnawn to ha ve 
producedaMillion Bbls. of Flour in a single year. 

f Population, July /^' is 19 -Bureau of the Census Estimates 
^EPEHEuc^si Wheat Product /on / 9 /a -Bureau of Crop estimates 

{ Flour Production isia- United States Grain Corporation 



flour has been shifting from these small neighborhood mills to the 
larger commercial mills referred to above. Furthermore, these new 
large mills have been located in centers and areas offering peculiar 
advantages in regard to wheat supply and transportation facilities, 
together with satisfactory sources of power. 

As a consequence of this development of wheat-flour milling 

within the areas which produce good milling wheat in adequate 

quantities, it is easy to set off a wheat-flour zone, as shown in Map I 

above. Every State included in this wheat-flour zone has at some 

183256°— 20 2 



18 



COMMERCIAL WHEAT-FLOUR MILLING. 



time produced more than a million barrels of flour in a single year. 
No State included in the small production areas has ever, so far as 
known, produced a million barrels in a single year, nor in recent 
years much in excess of half a million barrels. 

The States are listed below in order of output, together with the 
barrels of flour produced by each in the year ending June 27, 1919, 
according to the reports of the Grain Corporation: 



Barrels. 


,273, 


000 


, 668, 


000 


,690, 


000 


, 021, 


000 


,339, 


000 


,544, 


000 


, 817, 


000 


, 628, 


000 


,583, 


000 


,137, 


000 


,106, 


000 


,918, 


000 


,914, 


000 


, 630, 


000 


, 555, 


000 


,491, 


000 


,274, 


000 


,236, 


000 


,082, 


000 


, 934, 


000 


,709, 


000 


,522, 


000 


,481, 


000 


,268, 


000 


,024 


000 


>999, 


000 


670, 


000 



Siat£S in small-production areas. 



States in wheat-flour zone, 

Minnesota , 28 

Kansas 12 

New York S 

Missouri 8 

Illinois 6 

Ohio 5 

Washington 4 

Texas 3 

Indiana 3 

California 3 

Oklahoma 3 

Oregon 2 

Nebraska 2 

Pennsylvania 2 

Tennessee 2 

Kentucky 2 

Michigan 2 

North Dakota 2 

Virginia 2 

Montana 1 

Wisconsin 1 

Iowa 1 

Colorado 1 

North Carolina 1 

Idaho 1 

Maryland ' 

South Dakota 

1 Includes flour produced in the District of Columbia. 
» Production in 1914 according to the census. 

The total production shown above for the Wheat Flour Zone was 
about 118 million barrels; for the small-production areaSj less than 
3 million barrels. The per capita production was respectively 1.5 
and 0.1 barrels. Assuming that consumption was approximately 1 
barrel per capita " in the Wheat Flour Zone, its mills made about 
50 per cent more flour than it required for its own use. On the 
same basis the States in the small-production areas supplied only 
about a tenth of their own needs. Again, accepting the same 
estimate of consumption, since the estimated population of the Wheat 

" One barrel per capita is approximately the estimated average consumption for the entire United States 
shown on p. 14. 



Utah 

Georgia 

West Virginia. . . 

Arkansas , 

Wyoming 

South Carolina. . 

Delaware 

Arizona 

New Jersey 

New Mexico 

Nevada 

New Hampshire. 

Alabama 

Massachusetts... 

Maine 

Vermont 

Louisiana 

Mississippi 

Florida 

Connecticut 

Rhode Island 



Barrels. 

566, 000 

502, 000 

475, 000 

314,000 

116,000 

104, 000 

89, 000 

86, 000 

83.000 

81, 000 

78,000 

78,000 

38, 000 

2 14, 000 

2 9, 000 

2 3, 000 

7,000 
(') 



• No information available. 



GENERAL SURVEY. 19 

Flour Zone was 79 millions in 1919 it must have had a surplus for 
sale in other States or abroad, approaching 40 million barrels. On 
this same basis, since the States in the small-production areas had 
a population of 28 millions, they must have obtained from other 
States some 25 million barrels of their flour supply. In 1919 the 
Wheat Flour Zone produced 906,411,000 bushels of wheat, the 
small-production areas only 34,576,000 bushels. 

The relation of different States to commercial milling, indicated 
by their production and approximate consumption of wheat flour, 
is the basis for the division of the United States into the areas shown 
on Map II (facing p. 20). 

The small production areas shown on this map do not include 
exactly the same States as they do in Map I, on page 17, because 
un^er the more specific classification used for Map II the States 
whose consumption is considerably in excess of their production 
have been transferred to buying areas. In other words, this map 
includes under the title "Small Production Area" only States whose 
consumption, as well as their production, is relatively of small 
importance. 

The States of considerable importance in the commercial flour 
market have been divided into three main groups, and Map II 
shows the territory occupied by each of these groups, divided into 
areas determined by location, but also in accordance with other 
distinctive characteristics of the different areas. The first group, 
which constitutes the "Selling Areas," includes only those States 
each of which have an approximate commercial market surplus, or 
excess of production over consumption ^^ amounting to over 1,000,000 
barrels.^^ The second group, which constitutes the "Buying Areas," 
includes only those States each of which have an approximate demand 
for flour from other States, determined by the same method, amount- 
ing to over 1,000,000 barrels. There remains a third group of 
States located in the Wheat Flour Zone shown on Map I which 
does not come under either of these classifications, because on the 
same basis none of them show an annual commercial market surplus 
or deficit amounting to 1,000,000 barrels. The failure of these 
States to classify in either the selling or buying group has made it 
convenient to designate the territory occupied by them as Neutral 
Areas. 

Northwestern Selling Area.- — For 30 years the most important 
group of commercial mills in the United States has been located 
in the State of Minnesota. In recent years the milling industry has 
also been growing rapidly in North Dakota and Montana. These 

» The number of barrels consumed is assumed to be equal to the estimated population of the States. 
" The only exception to this rule is the State of Idaho, which is included in the Pacific Selling Area 
because of its production of over 2 barrels per capita and its rapidly increasing output. 



20 COMMERCIAL WHEAT-FLOUR MILLING. 

three States constitute a large part of the area generally Tcnown in 
the grain and flour trade as the Northwest. The extraordinary- 
development of wheat-flour milling in this area during the last 50 
years is due to its large production of hard spring wheat, and the 
recognition, practically throughout the world, of the excellence of 
hard spring wheat flour. According to the census of 1870 the value 
of flour and grist mill products in Minnesota was $7,534,575." There 
was an eightfold increase in the next 20 years, the wheat flour alone 
being valued at $54,029,614 in 1889.*^ In that year the State made 
13 million barrels of flour — at least 11 million barrels more than the 
probable consumption by its own people. In 10 years more this sur- 
plus had increased to 20 miUion barrels. 

According to the map the Northwestern Selling Area produced 32.4 
million barrels of flour in 1918-19, although it had a population of only 

3.7 millions. It apparently sells to other States and abroad between 25 
and 30 million barrels of flour each year. Its per capita production of 

8.8 barrels is not approached by any other area. The map shows. that 
over three-fourtliLS of the wheat harvested in this area in 1918 was 
hard spring wheat.^® However, in spite of the very good harvest of 
that year the quantity of hard spring wheat produced was but 
little over 150 million bushels. When this is compared with the 
flour produced in 1918-19, amounting to 32.4 million barrels, some 
question is at once raised as to a continued satisfactory supply of 
this wheat for the mills of this area, after providing seed and allowing 
for waste. The importance of this matter is emphas'ized by the 
decrease in the total wheat crop of the area from 206 million bushels 
in 1918 to 102 million bushels in 1919, in spite of an insignificant 
increase in the acreage sown. 

It should be noted, however, that a considerable part of the 75 
million bushels of hard spring wheat produced in the Central Neutral 
Area is grown in States adjacent to Minnesota and finds its best 
market in that State. 

The table below compares the wheat crop, the flour production, 
and the population of the Northwestern Selling Area for specified 
periods between 1899 and 1919 at five-year intervals. The wheat 
crop is the average of three crops for the periods incUcated as esti- 
mated by the Department of Agricultm-e. (See p. 12.) The flour 
production is the merchant mill output''' reported by the census, 

M Census 1870, vol. 3, p. 536. 

« Census Bulletin, Flouring and Grist Mill Products, 1902, p. 13. 

* See Exhibit II, p. 108, for the percentage table on which the figures for hard spring, hard winter, and 
other wheats shown on the map are based. The necessarily approximate character of all such expert esti- 
mates has already been noted. 

" It would have been desirable to have used the production in all mills, but it was not available by States 
for 1904, 1909, and 1914. Merchant mill output for the entire country, however, constituted 99.38 per cent 
of total production in 1914. Furthermore, total production has been used for the comparisons between 
1899 and 1919, as shown in Table 12. 



\d deficit Small Production ffreas, states having 
her states. . 




Map II. 



WHEAT FLOUR PRODUCTION AND DISTRIBUTION AREAS 

Note, Selling eireas include states having a mi//ion barre/s esfimafed sutp/us f/ouroutoui- Ruwinr, a j^ ^ ■ 

less fl,an a n^illian barrels of p.actu.fionand also less fi,an a r^aifonZ%rJ!i7^„7::^^^,7^i''^^^^^^^^^^ ^re.s. states l,a.in. 




183256°— 20. To face page 20.) 



./'/ 



GENERAL SURVEY. 



21 



except for 1919, wliich is the production reported by the Grain Cor- 
poration. The population is the census estimate for July 1 of the 
given year. 

Table 5. — Wheat crop, flour production, and population in the Northwestern Selling 
Area, 1899, 1904, 1909, 1914, and 1919. 



Period. 


Estimated 

average annual 

wheat crop. 


Year. 


Flour pro- 
duction. 


Estimated 
population. 


1897-1899 . 


BvsheU. 

127,917,484 

132, 830, 162 

149,183,081 

180,231,667 

144,593,333 


1899 
1904 
1909 
1914 
1919 


Barrels. 

23,8&3,486 

25,392,252 

24,938,764 

30,169,151 

32,443,000 


2,252,482 
2, 609, 500 
2,971,502 
3, 333, 499 


1902-1904 


1907-1909 .' 


1912-1914 


1917-1919 


3,695,498 





Except for the 1909 figures, the table indicates a steady increase 
in flour production.^* In 1899 the indicated surplus over consump- 
tion was 21 i millions. Owing to the relatively small production in 
1909, no appreciable increase in the surplus is indicated for the first 
10 years of the period. From 1909 to 1919, on the contrary, there 
was an increase of 7^ million barrels in output and an indicated in- 
crease in surplus amounting to six or seven millions. The wheat 
crop has not increased so rapidly as flour production, and, as aheady 
noted (see p. 20), even in good years hardly enough hard spring 
wheat is harvested to provide seed and a sufficient supply for the 
mills to maintain their maximum output. As the table shows, the 
average crop of the last three harvests, including all the durum and 
other varieties of wheat, would have been barely sufficient for the 
flour production in 1918-19, even if there had been no waste and no 
provision for seed. 

Southwestern Selling Area}^ — Kansas and the tliree adjacent 
States — Nebraska, Oklahoma, and Missouri — constitute the South- 
western Selling Area. This is unquestionably the area that now 
promises most in the way of increased flour production. This, how- 
ever, depends in part on the assumption that its people will be willing 
to use their own soft wheat flour to some extent in order to sell the 
more marketable hard wheat flour. 

Map II shows that in 1918 this Southwestern area produced 231 
million bushels of wheat, of which 152 millions was the hard winter 
wheat from which a flour is made that is not far behind the hard spring 
wheat flour in its bread-making qualities. The difference in the 
quantities of hard wheat produced in the two principal selling areas 
is apparently negligible. As aheady noted, the Southwestern area 
has an advantage over the Northwestern in a greater supply of soft 

'8 Per capita flour production in the Northwestern Selling Area was as follows: 1899, 10.6 barrels; 1904, 
9.7 barrels; 1909, 8.4 barrels; 1914, 9.1 barrels: 1919, 8.8 barrels, 
w The territory tributary to Kansas City is known in the grain and flour trade as the Southwest. 



22 



COMMERCIAL WHEAT-FLOUR MILLING. 



wiieat which it can use itself if necessary, but also a disadvantage 
from the point of view of commercial milling, in that it has nearly 
two and one-half times as large a population to supply with flour. 
Consequently, although it makes over three-fourths as much flour, 
26.7 miUion barrels, as compared with 32.4 miflions, its surplus for 
shipments to other States may not be much, if any, over half that 
sent out by the Northwestern area. 

The table below furnishes the same data for the Southwestern 
Selling Area that are shown for the Northwestern on page 21. 

Table 6. — Wheat crop, flour production, and population in the Southwestern Selling 
Area, 1899, 1904, 1909, 1914, and 1919, 



Period. 


Estimated 

average annual 

wheat crop. 


Year. 


Flour pro- 
duction. 


Estimated 
population. 


1897 1899 


Bushels. 

111,649,604 

163,536,221 

1.59, 977, 874 

244,735,333 

225,744,000 


1899 
1904 
1909 
1914 
1919 


BarreU. 
12, 884, 074 
17,511,271 
21, 032, 602 
22,635,310 
26,709,000 


6,341,703 


1902 1904 


7,012,668 


1907 190') 


7,721,432 


1912 1914 


8,430,190 


1917 1919 


9,138,950 







In general the table shows that the supply of wheat has more than 
doubled in the last 20 years and the production of flour ^° has kept 
pace with it, while population has increased less than 50 per cent. 
Consequently its indicated surplus for shipment to other sections of 
the coimtry increased from about 6.5 million to about 17.6 miUion 
barrels. Apparently the wheat fields of this area will be able to 
supply its mills abundantly, even if its surplus flour for outside mar- 
kets is pushed up to or even beyond the present shipments of the 
Northwestern Selling Area. It is to be remembered, however, that 
the mills of the Northwest are already drawing large quantities of 
wheat from this area, and that the rapidly increasing flour output 
of Texas is in part due to the ready availability of hard winter wheat. 

Pacific Selling Area. — ^A third area of increasing commercial im- 
portance includes Washington, Oregon, and Idaho in the Pacific 
Northwest. The large surplus of wheat in this area and its great 
distance from important flour markets results in a lower cost of 
wheat to its millers than to those of any other important producing 
section. Consequently, although it produces many varieties of 
wheat, most of which are decidedly inferior to the hard wheats of 
the plains States for the production of bread-making flours, the area 
is always able to find a market for its increasing flour surplus either 
in California, in the Orient, in South America, or in the southeastern 
part of the United States. 

The map shows that this area produced 15 million bushels of hard 
wheat in 1918. This was mor6 than enough to supply its own popu- 

*> Per capita flour production in the Southwestern Selling Area was as follows: 1899, 2 barrels; 1904, 
2.fi barrels; 1909, 2.7 barrels; 1914, 2.7 barrels; 1919, 2.9 barrels. 



GENERAL SURVEY. 



23 



lation with hard-wheat flour. Apparently, however, flour from this 
wheat does not have the same bread-making quahties as hard-wheat 
flour made farther east, since that flour is sold in the Pacific North- 
west at a premium over the home product. The wheat production 
shown on the map, which is the crop of 1918, was considerably below 
the average production for some years past. As a matter of fact, 
the available surplus wheat is sufficient so that there need be no 
immediate concern on the part of the millers on that score. 

The table below furnishes the same data for the Pacific Flour 
SelUng Area that are shown for the Northwestern on page 21. 

Tablk 7. — Wheat crop, flour production, and population in the Pacific Selling Area, 
1S99, 1904, 1909, 1914, and 1919. 



Period. 


Estimated 

average annual 

wheat crop. 


Year. 


Flour 
production. 


Estimated 
population. 


1897-1899 


Bushels. 
44,793,967 
45,261,092 
58,590,250 
81,743,000 
65,366,000 


1899 
1904 
1909 
1914 
1919 


Barrels. 
3,868,793 
5,074,612 
4,550,545 
6,128,369 
8,759,000 


1,063,168 


1902-1904 


1, 526, 321 


1907-1909 


2,056,416 


1912-1914 


2,586,511 


1917-1919 


3, 116, 606 







It appears from the above table that there is slight probability 
of the Pacific Flour Selling Area becoming as important in the com- 
mercial flour market as either of the other flour-selling areas. Its 
wheat production at the beginning of the period covered by the 
table was considerably less than half that produced in either of the 
other areas and the increase during the 20 years was by no means 
so rapid as it was in the Southwestern. Nevertheless, its flour pro- 
duction increased from 3.9 miUion barrels in 1899 to 8.8 million 
barrels in 1919, or at a more rapid rate than the increase in cither of 
the other areas.-* Population, however, was increasing stiU more 
rapidly. In 1 899 it was less than one-half that of the Northwestern 
area and but one-sixth that of the Southwestern. But in 1919 it was 
five-sixths that of the Northwestern and over a third that of the 
Southwestern. Measuring consumption by population, the indi- 
cated increase in the Pacific area during the last 20 years was over 
2 million barrels, in the Northwestern less than 1 million and a half, 
and in the Southwestern less than 3 millions. 

In spite of this rapid increase in the population of the Pacific 
SeUing Area, its indicated surplus of flour for shipment to outside 
territory shows increases in each of the years covered except 1909. 
On the generous assumption that the consumption of flour in the 
area is 1| barrels per capita, the surplus for export in 1899 was 
about 2 million barrels and increased to nearly 5 miUions in 1919; 
that is, in spite of the rapid increase in population and the less 



21 Per capita flour production in the Pacific Flour Selling Area was as follows: 
1.3 barrels; 1909, 2.2 barrels; 1914, 2.4 barrels; 1919. 2.8 barrels. 



9, 3.6 barrels; 1904, 



24 



COMMERCIAL WHEAT-FLOUR MILLING. 



favorable progress of the wheat supply as compared with the South- 
west, the surplus flour available for shipment outside its territory 
probably increased at a faster rate in this area than in either of the 
others. 

Eastern Buying Area. — The above description of flour-selling areas 
shows that 10 States located in a general way in the northwestern 
part of the country usually produce surplus flour to the amount of 
40 to 50 million barrels annually. On the other hand, seven States 
located east of the Alleghenies and north of Virginia and nine States 
in the South, beginning with North Carolina and ending with Texas, 
together afford a market for from 30 to 35 million barrels of flour 
sent in from other States. 

The Eastern Buymg Area, which includes Massachusetts, Rhode 
Island, Connecticut, New York, New Jersey, Pennsylvania, and West 
Virginia, has a population of 30.2 million people and a flour produc- 
tion of only 11.9 million barrels, or 0.4 of a barrel per capita. On the 
assumption that flour consumption in this territory is practically 
the same per capita as the average for the United States in recent 
years, it must afford a market for outside flour to the amount of 18 
to 20 million barrels annually. This area produced only about 40 
million bushels of wheat in 1918 — much less than was used in its 
0's\ai mills. Ninety-five per cent of the crop was soft winter wlieat. 

Most of the mills in this area are comparatively small and are so 
situated that it would be impossible for them to maintain the standard 
qualities in their product which is required in flour that sells readily 
in commercial markets. 

A marked exception to this general rule is the group of large mills 
located at Buffalo, N. Y. The advantage of lake transportation 
for hard wheat from the West and electric power from Niagara 
Falls enables them to compete successfully with the western mills. 
The consequent increase of the flour output of mills in Buffalo and 
its vicinity from about 2 millions in 1904 to an average of over 6 
millions in recent years,^^ has raised the per capita production of 
flour in this area far bej^^ond what it otherwise would have been. 

The table below furnishes the same data for the Eastern Buying 
Area that are shown for the Northwestern on page 21. 

Table 8. — Wheat crop, flour production, and population in the Eastern Buying Area, 
1899, 1904, 1909, 1914, and 1919. 



Period. 



Estimated 




average annual 


Year. 


wheat crop. 




Bushels. 




41,199,091 


1899 


36, 770, 764 


1904 


39,934,436 


1909 


34,151,333 


1914 


42,066,000 


1919 



Flour 
production. 



Estimated 
population. 



1897-1899. 
1902-1904. 
1907-1909. 
1912-1914. 
1917-1919. 



Barrels. 
10, 604, 845 
10,6i9,021 
11,369,357 
13, 199, 741 
11,892,420 



20,211,494 
22, 625, 378 
25,159,550 
27,693,726 
30,227,8% 



»2 The Millers Almanac, 1918-19, p. 149. 



GENEKAL SURVEY. 25 

The foregoing table shows a situation strikingly different from that 
which exists in the selling areas. The first four periods show decreases 
in the wheat supply, but under the stimulus of w^ar demand the last 
period shows a crop slightly in excess of that raised 20 years before. 
In marked contrast the population has increased from 20 millions 
at the beginnmg of the period to 30 millions at the end. That is, 
there has been an increase of 50 per cent in the demand for flour with 
practically no increase m the supply of wheat. Flour production 
shows some increase; more, indeed, than the increase in the w^heat 
crop.^^ The reason for this, as shown above, is the rapid growth of 
w^heat-flour production in Buffalo and vicinity. Although the table 
shows a decrease in the output of flour from a little over 13 million 
barrels in 1914 to something less than 12 millions in 1919, it would 
not be safe to argue from this that a tendency to declining output 
has been established. The probability is that this decrease is in 
considerable part due to Government activities affecting the produc- 
tion of flour during the war and since then. 

Southern Buying Area. — This area iiicludes the States of North and 
South Carolina, Georgia, Florida, Alabama, Mississippi, Louisiana, 
Arkansas, and Texas. The dependence of a considerable part of 
this territory on outside sources for its wheat-flour supply is not 
fully brought out by the map because of the recent development of 
hard winter wheat milling in Texas and a still more notable increase 
in both the w^heat crop and the flour production of North Carolina, 
which together increase the figures shown for the entire area very 
considerably. Indeed, while only about one-third of the population 
of the area resides in these two States, they produce over 80 per cent 
both of its flour output and of its wheat crop. 

In spite of the rapid increase in flour production in Texas and 
North Carolina, w^hich, if continued, will in no long time render them 
independent of the surplus flour producing States, they each buy 
over a million barrels of flour annually from other States at the 
present time and have, for that reason, been grouped with other 
States in the Southern Buying Area. 

The map shows that this area has a population of 21 millions, and 
that in 1918-19 it produced only 6 million barrels of flour. Even 
this small production could hardly have been made from its wheat 
crop in 1918 after providing for seed and ordinary waste in storage 
and transportation. The wheat that is produced is in large part 
soft winter wheat, although Texas is developmg the production of 
hard winter wheat on its high northern plains. Even including 
Texas and North Carolina the area probably produces but little, if 
any, more than a third of the flour it consumes. 

" Per capita flour production in the Eastern Buying Area was as follows: 1899, 0.52 barrels; 1904, 0.47 
barrels; 1909, 0.46 barrels; 1914, 0.48 barrels; 1919, 0.39 barrels. 



26 



COMMERCIAL WHEAT-FLOUR MILLING. 



It is hardly necessary in this report to enter into a disctission of the 
natural advantage's of this area in the production of cotton and other 
semitropical products, or to point to its relative disadvantages in the 
production of wheat, or of flour that would satisfy the requirements 
of its large central markets. 

The table below furnishes the same data for the Southern Buying 
Area that are shown in the table on page 21 for the Northwestern: 

Table 9. — Wheat crop, flour production, and population in the Southern Buying Area, 
1899, 1904, 1909, 1914, and 1919. 



Period. 


Estimated 

average annual 

wheat crop. 


Year. 


Flour 
production. 


E'itimated 
population. 


1897 1899 


Bushels. 
19,832.018 
24.336,826 
15, 853, 057 
23, 606, 000 
35,852,333 


1899 
1904 
1909 
1914 
1919 


Barrels. 
4,49.8,368 
5,109,952 
4,821.702 
5, 719. 892 
5,861,000 


14. 842. .579 


1902 1904 


16, 360, 041 


1907 1909 


17,901,884 


1912 1914 


19. 443, 734 


1917 1919 


20, 985, 584 







This area has increased its wheat crop in the last 20 years more 
rapidly than any other area shown on the map, except the South- 
western Selling Area and the Western Small Production Area. 
But Texas produced 31 million bushels of wheat in 1919 in contrast 
with an average production for the whole area in 1907, 1908, 1909 
of only 16 million bushels. Nevertheless, detail figures for all the 
States except South Carolina, Florida, and Louisiana show large 
increases in the last 10 years. The very great increase in the last 
period was undoubtedly in large part due to the war. It appears 
probable, however, that the Cotton States are really making progress 
in the diversification of their farm products. 

In spite of the remarkable increase in the flour output of North 
Carolina and Texas, flour production for the entire area increased 
only about 1^ million barrels,^* while population increased 6 mil- 
lions.^* 

Central Neutral Area. — ^As already noted, large production States 
which apparently have annual wheat-flour surpluses or deficits of 
less than 1,000,000 barrels have been grouped in areas designated 
as "Neutral." They occupy territory which has been divided into 
the Central, Southeastern, and Western Neutral Areas. Possibly 
the low-flour output, hard-wheat producing States — South Dakota, 
Iowa, and Wisconsin — could have been set off in a separate group 

M This is the only area in wWch the use of merchant mill output instead of total production materially 
affects these comparisons. If total production in the Southern Buying Area is used for 1899, this increase 
shrinks to 600,000 barrels. 

25 Per capita production of flour in the Southern Buying Area was as lollows: 1899, 0.30 barrels; 1904,0.31 
barrels; 1909, 0.27 barrels; 1914, 0.29 barrels; 1919, 0.28 barrels. 



GENERAL SURVEY. 



27 



to advantage, but they have been included with Illinois, Michigan, 
Indiana, and Ohio in the Central Neutral Area. 

This area produces more wheat than either of the great flour- 
selling areas, yet according to the data on the map its mills apparently 
fail to manufacture enough flour for its own population, the flour 
production being shown as only 21.6 million barrels, while the popu- 
lation numbers 23.3 millions. This gives a per capita production 
of only 0.9 barrels — somewhat less than the average per capita 
consumption of the entire country. Two reasons for this situation 
appear quite clear. Most mills in this area are much smaller than 
those in the selling areas, and their limited output, together with 
transportation difficulties, make it impossible for them to produce 
the constantly maintained and standardized quality of flour required 
in a commercial market. They are also at a disadvantage in that, 
although they have an abundant supply of soft wheat readily avail- 
able, it is possible to sell only a limited quantity of soft wheat flour 
in competition with the hard wheat flours produced farther west, 
and such sale's must be made at a considerable discount below hard 
wheat flour prices. 

It should be noted further that some of the hard wheats produced 
in the northwestern section of this area are undoubtedly shipped 
into and ground in the hard wheat flour selling areas. The table 
below shows the same data for the Central Neutral Area as are 
shown for the Northwestern on page 21. 

Table 10. — Wheat crop, flour production, and population m the Central Neutral Area, 
1899, 1904, 1909, 1914, and 1919. 



Period. 


Estimated 

averase annual 

wheat crop. 


Year. 


Flour 
production. 


Estimated 
population. 


1.S97-1S99 


Bushels. 
186, 497, 083 
150, 9SS, 598 
170, 175, 070 
1(50, 772, 667 
230, 790, 333 


1899 
1904 
1909 
1914 
1919 


Barrels. 
30, 039, 443 
27, 276, 069 
2\ 344, 245 
25,401.222 
21,641,000 


18, ?55, 022 

19, 628, 065 
20. 863, 648 
22 102 246 


1902-1904 


1907-1909 


1912-1914 


1917-1919 









The decrease of 9 million barrels m the flour production of this 
area in a 20-year period,-" during which its population increased 5 
millions, is one of the most interesting contrasts that has developed 
in the industry. Because of these changes its indicated surplus for 
shipment into other areas, or abroad, which amounted to 12.3 mil- 
lion barrels in 1899, was replaced by an indicated deficit in its own 
flour markets amounting to 1.7 million barrels. As a matter of fact, 

^ Per capita flour production in the Central Neutral Area was as follows: 1899, 1.7 barrels; 1904, 1.4 bar- 
rels; 1909, 1.3 barrels; 1914, 1.1 barrels; 1919, 0.9 barrel. 



28 



COMMERCIAL WHEAT-FLOUR MILLING. 



it has retained a considerable part of its trade in otitside territory, 
and its own population consumes a corresponding amount of hard- 
wheat flours shipped in from the West. In a general way wheat and 
flour output went down together during the first 15 years. It is 
quite impossible to tell whether or not this tendency would have 
been continued had it not been for higher wheat prices and Govern- 
ment regulation of flour milling in recent years. It certainly may be 
questioned, however, whether the revival of soft-wheat production 
in this area will result in a corresponding increase in its output of 
flour. On the other hand, it is altogether improbable that the up- 
ward trend of the crop and the downward trend of the flour output 
shown from 1914 to 1919 can continue for any length of time. 

Southeastern Neutral Area. — The States of Kentucky, Tennessee, 
Maryland, and Virginia have had a sufficiently different experience 
from the neutral area farther west to warrant setting them off as the 
"Southeastern Neutral Area." The crop in this area is composed 
entirely of soft winter wheat. This is produced apparently in nearly 
sufficient quantity to supply its mills and seed its fields. The mills 
in turn appear to produce nearly — possibly quite — enough flour to 
supply the population, since these States are supposed to use corn 
meal in considerable quantity. 

The table below furnishes the same data for the Southeastern 
Neutral Area that are shown for the Northwestern on page 21. 



Table 11. 



■Wheat crop, flour production, and population in the Southeastern Neutral 
Area, 1899, 1904, 1909, 1914, and 1919. 



Period. 


Estimated aver- 
age annual 
wheat crop. 


Year. 


Flour pro- 
duction. 


Estimated 
population. 


1897-1899 


Bushels. 
46, 214, 835 
31,700,370 
36,792,082 
38,884,333 
43,247,333 


1899 
1904 
1909 
1914 
1919 


Barrels. 
8,811,547 
8, 658, 002 
8,892,454 
9, 089, 015 
8,127,000 


7,403,135 
7, 767, 4.31 


1902-1904 


1907-1909 


8,108,689 
8,449,947 
8,791,207 


1912-1914 


1917-1919 





This area appears to be in every respect more stationary than the 
others so far reviewed. Its population shows considerably less than 
one-half the rate of increase in the country as a whole, and the fig- 
ures establish no trend in regard to flour production.-^ This means, 
of course, a slight decline in per capita output. On the whole, in 
spite of the larger crop shown for the last period, the indication is 
that the wheat crop is declining and probably does not fully supply 

^ Per capita flour production in the Southeastern Neutral Area was as follows: 1899, 1.2 barrels; 1904, 
1.1 barrels; 1909, 1.1 barrels; 1914, 1.1 barrels; 1919, 0.9 barrel. 



GENERAL SURVEY. 29 

the mills in the area. The surplus soft wheat of the Central Area is, 
however, readily available. 

Western Neutral Areas. — California and Colorado in the West each 
produce more than a million barrels of flour and under the rule fol- 
lowed can not be classified either in the buying or selling areas. Since 
California is apparently losing rank as a wheat and flour producer, 
while Colorado is making rapid progress, nothing would be gained 
by combining data for the two States. 

During the 20 years under review progress of population was simi- 
lar — a little less than 100 per cent for Colorado but something over 
100 per cent for California. On the other hand, from 1899 to 1914 
Colorado's wheat production (three-year average) increased from 5.8 
to 10.7 million bushels, while that of California fell off from 27 mil- 
lion bushels to 5.8 millions. During the war California's crop in- 
creased again to 10.5 million bushels and Colorado's crop went on 
up to 14.8 millions. California's flour output showed a consistent 
decline from 2.7 million barrels in 1899 to 1.8 millions in 1914, but in 
1919 it amounted to 3.1 millions. Colorado's flour output did not 
respond to the increasing supply of wheat in the first ten years, but 
in the second it increased from a million to a million and a half 
barrels. 

Small Production Areas. — ^There are nine States^ W3^oming, Utah, 
New Mexico, Arizona, and Nevada in the West, and Maine, New 
Hampshire, Vermont, and Delaware in the East — whose combined 
output of flour is but little more than a million barrels a year. In 
fact, up to 1909 it was less than a million. Their wheat crop is almost 
as insignificant. It is worthy of note, however, that it nearly doubled 
during the 20 years, amounting to 2.4 million bushels in the Eastern 
States in 1919 and 16.2 millions in the Western States. The popu- 
lation of the Western States doubled in the 20 years, amounting to 
1.5 millions in 1919. The eastern group increased its population 
from 1.6 to 1.8 millions. It is evident that the entire demand for 
flour from other States is relatively insignificant. Further infor- 
mation in regard to the small production areas as well as the other 
areas will be found in Exhibit III. 

Wheat crop, jlour 'production, and population of the United States, 
and of certain areas compared.-^ — Wheat crop, flour production, and 
population figures for the United States as a whole in 1899 and in 
1919 are shown in the following table, together with the percentages 

28 See also Exhibit HI. It would have been instructive to have pre I'nted figures on acreage sown in 
this connection, but satisfactory statistics were not obtained. The eftects of marked changes in yield per 
acre have, however, been noted ia the text. 



30 



COMMERCIAL WHEAT-FLOUR MILLING. 



of these totals found in the more important areas shown'on Map II 
(see footnotes to table) : 

Table 12. — Wheat crop, flour production, and population of the United States- in 1S99 
and 1919, together loith the different percentages of those totals found in the more 
important areas shown on Map II. 



Wheat 
crop.' 



Flour 
production.' 



Popula- 
tion.' 



United States: 

1S99 

1919 



BvsJieh. 
621, 277, 375 
831,. 580, 667 



Barrels. 
103, 524. 094 
121, 156, 373 



74,798,612 
106, 877, 895 



Northwestern Selling Area: 

1899 

1919 

SoutlrA-estern Selling Area: 

1899 

1919 

Pacific Selling Area: 

1899 

1919 

Eastern Buying Area: 

1H99 

1919 

Southern Buying Area: 

1SS9 

1919...: 

Central Neutral Area: 

1899 

1919 

Southeastern Neutral Area: 

1899 

1919 



. per cent 
do.. 



.do., 
-do.. 



.do., 
-do.. 



.do., 
-do.. 



.do., 
.do.. 



.do., 
-do.. 



-do., 
-do.. 



20.6 
17.4 



18.0 
27.1 



7.2 
7.9 



6.6 
5.0 



3.2 
4.3 



30.0 
27.8 



7.5 
5.2 



23.2 

26.8 



12.9 
22.0 



3.8 
7.2 



11.1 

9.8 



5.1 

4.8 



30.4 
17.9 



9.0 

6.7 



3.0 
3.5 



8.5 
8.6 



1.4 
2.9 



27,0 
28.3 



19.8 
19.6 



24.5 
21.8 



9.9 
8.2 



> Average of crop for 1897-08-99 and 1917-18-19, Department of Agricultiu-e estimates. 
' Bureau of Census figures for 1899 and United States Grain Corporation figures for 1919. 
• Buixau of the Census estimate as of July 1. 

This table shows, as has already been noted, that from 1899 to 
1919 population increased over twice as fast as flour production. 
Wheat made better progress than flour, but its rate of increase, in 
spite of the war, was much below that of population. It is not to 
be assumed from these figures, however, that wheat farming in the 
United States will continue to develop more rapidly than the wheat- 
flour industry. The probable explanation of the lag in flour output 
compared with wheat production is the lack of assurance on the part 
of the miller that the increase of 34 per cent in 20 years shown by 
the wheat crop is to be accepted as so much permanent addition to 
their readily available supplies of satisfactory raw material. 

Table 12 shows that during the 20 years it covers, the Northwestern 
Selling Area added 3.6 per cent to its proportion of total flour output, 
but that the addition to its proportion of total population was only 
0.5 per cent and that there was a decrease of 3.2 per cent in its wheat 
crop. The increasing importance of this area in the commercial 
flour markets of other States is made very plain by this comparison. 
It also indicates a very considerable decline in its relative importance 
in the production of wheat. This is probably due to the poor yield 
per acre in 1917, 1918, and 1919, as estimates of acreage sown show 
a slight increase. Prior to 1900 the flour industry in this area had 
been developing rapidly because of the ready availability of hard 



GENERAL SURVEY. 31 

spring wheat in excess of its own requirements. The excellence of 
the flour made from this wheat, and the business enterprise of the 
mills, have brought about the situation shown by Table 12, in which, 
apparently, the rapid growth of the flour business has carried it 
beyond those favorable conditions of wheat supply which existed 
between 1870 and 1900. 

The contrast between this situation in the Northwest and that in 
the Southwest is striking. There the readily available supply of 
wheat, much of it of an excellence that makes it a strong competitor 
of hard spring wheat, is still increasing rapidly, and the remarkable 
expansion of the flour output of the area does not yet seriously 
threaten the great surplus of the raw material which is responsible 
for that expansion. The population figures show that there was 
practicaUy no increase in its relative importance as a market for 
flour during the 20 years. On the other hand, its proportion of the 
total flour output and its proportion of the total wheat crop were 
both increased by 9.1 per cent. The estimated increase in acreage 
sown was considerably greater, amounting to 14.2 per cent. This 
means that, although its importance in the flour production of the 
United States had increased over 70 per cent, the surplus of wheat 
on which that remarkable progress depended was larger at the end 
of the period than at its beginning. 

Almost as interesting a situation of quite a different character has 
developed in the Pacific Selling Area. The rate of increase in popu- 
lation in that area has been remarkable, much more rapid than the 
rate of increase in its flour output. This indicates, of course, that 
with a continuation of exactly the same conditions this area would 
in time become a buyer of flour instead of a seUer. But its popula- 
tion is so small that, even with the rapid increase, it included only 
1.5 per cent more of the country's flour consumers in 1919 than in 
1899. On the other hand, its proportion of total flour output had 
increased 3.4 per cent. This, as already noted on page 23, indicated 
a considerable increase in its shipments to other States and to foreign 
countries. The wheat figures make it evident, however, that the 
importance of the area in outside markets can not be permanent 
without some change in the indicated tendency of wheat farming. 

The degree of dependence of the two buying areas on other States 
for their flour supplies is clearly indicated by Table 12. Twenty- 
seven per cent of the entire population of the country was located in 
the Eastern Buying Area in 1899, and the table shows that the ten- 
dency to concentration in that territory still continues. Neverthe- 
less, its mills made only 11.1 per cent of the total flour output at the 
beginning of the period and their production had fallen to 9.8 per 
cent at its end. The relative smallness and decreasing importance 
of its wheat crop is even more striking. 



32 COMMERCIAL WHEAT-FLOUR MILLING. 

The degree of dcpondence shown in the Southern Buying Area is 
greater than that in the East. In 1899 its proportion of the total 
population was six times as large as its proportion of the total wheat 
crop, and nearly four times as large as its proportion of the flour 
output. During the 20 years covered by Table 12 the situation in 
regard to wheat improved slightly, but flour output was relatively 
smaller in 1919 than in 1899. 

In commenting on the Central Neutral Area, it is important to 
note that the war appears to have stimulated wheat production 
more in this area than in any other. Its crop had fallen from 30 
per cent of the total in 1899 to 20.2 per cent in 1914,-^ but increased 
from that figure to 27.8 per cent in 1919. As was to have been 
expected from the greater ease of expanding agricultural than 
manufacturing operations, flour output did not show the same 
response to increased demand. On the contrary, it continued on the 
down-grade characteristic of both products from 1899 to 1914. 
Furthermore, the fact that flour made from the wheat produced in 
this area can be sold only at a much lower price, than hard wheat 
flours undoubtedly discouraged any considerable increase in its 
production. It appears probable, therefore, that the flour figures for 
1919 are much more reliable as an index to the future situation in 
this area than the wheat figures. 

Table 12 only emphasizes the well-known fact that the great 
agricultural States of the upper Mississippi Valley have not been 
increasing in population as fast as other sections of the country for 
many years, by showing a decrease in the Central Neutral Area's 
proportion of the total population from 24.5 to 21.8 per cent. But 
the fact that this area is probably buying more flour than it sells 
in outside territory is surprising. In 1899 its relative importance 
as a flour consumer was 24.5 per cent, considerably less than its 
proportion of the total flour output, which was 30.4 per cent. The 
latter figure affords a striking contrast to 23.2 per cent for the 
Northwest and only 12.9 per cent for the Southwest. In 20 years, 
however, its proportion of flour output decreased 12.5 ])er cent, 
while that of the other two together increased 12.7 per cent. These 
figures present clearly, and probabl}^ with as much exactness as 
possible, the steady advance of the change from soft to hard wheat 
flour which, only fairly started in 1880, made very rapid progress in 
the next 20 years. 

The Southeastern Neutral Area has never been of special impor- 
tance in the commercial flour market, and that it should have been 
considerably less important in 1919 than 20 years before is a matter 
of no surprise. 

» See Exhibit III. 



GENERAL SURVEY. 33 

Concentration in the milling industry. — The increase of 
flour milling in the wheat-growing States, just discussed, has been 
accompanied by a concentration of the industry in certain favorably 
located cities, the growth of several powerful milhng concerns, and 
an increase in the number of large mills. 

Minneapolis, in the Northwest, Buffalo, on the water route to world 
markets, and Kansas City, in the Southwest, are the most important 
wheat-flour milling centers of the United States. Statistics of the 
trade ^^ indicate that half the net increase in flour output from 
1899 to 1914 was probably made in these three cities alone. 

In spite of the increasing concentration in the ownership of the 
large mills referred to above, flour milling may still be classed among 
industries in which a large part of the output is produced by relatively 
small concerns each operating a single plant. Nevertheless, the pro- 
portion of the total business done by a limited number of large 
companies is very considerable. This condition is most in evidence 
in years when failure of local wheat supply stops many of the small 
mills. It is probable that in such years over half the flour con- 
sumed in the United States is made by 100 concerns, 65 per cent 
by 200, and 80 per cent by 400. 

In 1914 the total output of the 218 largest mills (more than one 
owned by a single company in several instances) was over 60 per 
cent of the total output of the coimtry. The average output of these 
establishments was 329,000 barrels each. The average output of 
all other mills was less than 10,000 barrels each. 

The 218 mills just referred to each made 100,000 barrels or over 
in 1914. A classification of mills by barrels of wheat flour pro- 
duced was first made by the Bureau of the Census for 1899. Cus- 
tom mills were included in the classification in that year but have 
been excluded since. These mills, however, are all quite small. 
The classification for 1899 has, for that reason, been accepted as 
including none but merchant mills in the classes making 5,000 
barrels or. more. On this basis the figures show an increase in 
merchant mills making 100,000 barrels or more from 135 in 1899 
to 218 in 1914. In 1899, 2,584 mills were grinding from 5,000 to 
20,000 barrels each. In 1914 there were only 1,377 mills in that 
class. 

The figures given above show that, under conditions prevailing 
in the flour business for 20 years past, mills of large size are rapidly 
driving out their smaller competitors. In its bulletin on flour- 
mill and gristmill products in 1914 the Bureau of the Census classi- 
fies merchant mills in 32 States according to output in 1904, 1909, 
and 1914. That classification has been used in the following table 

30 The Miller's Almanack, published by the Northwestern Miller, 1918-19. 
183256°— 20 3 



34 



COMMERCIAL WHEAT-FLOUR MILLING. 



to show SO far as possible the class of commercial mills (those mak- 
ing a thousand barrels or over annually) operating in the different 
areas outlined on Map II. 



Table 13. 



-Classification of commercial flour mills according to output and location, 
1904, 1909, and 1914- 











1,000 but less 


5,000 but less 


2 1,000 bi]t less 


100,000 






All classes. 


than 


5,000 


than 20,000 


than 100,000 


barrels 




Cen- 
sus 
year. 






barrels. 


barrels. 


barrels. 


or more. 




Num- 


Per 


Num- 


Per 


Num- 


Per 


dum- 


Per 


Num- 


Per 






ber. 


cent. 


ber. 


cent. 


ber. 


cent. 


ber. 


cent. 


ber. 


cent. 


United States 


1904 
1909 


6,41.3 
5,621 


100.0 
100.0 


3,502 
3,145 


54.6 
56.0 


2,123 
1,733 


33.10 
30.83 


622 
550 


9.69 

9.78 


166 
193 


2.58 




3.43 




1914 


5,055 


100.0 


2,920 


57.8 


1,377 


27.24 


540 


10.68 


218 


4.31 


Northwestern Selling Area.. 


1904 


3S4 


6.0 


126 


1.9 


160 


2.49 


61 


.95 


37 


.58 




1909 


318 


5.6 


109 


1.9 


118 


2.10 


52 


.93 


39 


.69 




1914 


289 


5.7 


106 


2.1 


91 


1.80 


49 


.97 


43 


.85 


Southwestern Selling Area. . 


1904 


969 


15.1 


444 


6.9 


328 


5.11 


164 


2.56 


33 


.51 




1909 


863 


15.4 


371 


6.6 


279 


4.96 


158 


2.81 


55 


.98 




1914 


751 


14.9 


331 


6.6 


214 


4.23 


138 


2.73 


68 


1.35 


Pacific Selling Area 


1904 


176 


2.7 


58 


.9 


74 


1.15 


36 


.56 


8 


.12 




1909 


199 


3.5 


79 


1.4 


75 


1.33 


36 


.64 


9 


.16 




1914 


162 


3.2 


61 


1.2 


50 


.99 


40 


.79 


11 


.22 


Eastern Buying Area 


1904 


I 1,001 


15.6 


681 


10.6 


246 


3.84 


54 


.84 


20 


.31 




1909 


1909 


16.2 


623 


11.1 


232 


4.13 


40 


.71 


14 


.25 




1914 


1805 


15.9 


559 


11.1 


180 


3.56 


49 


.97 


17 


.34 


Southern Buying Area 


1904 


2 407 


6.4 


245 


3.8 


111 


1.73 


42 


.65 


9 


.14 




1909 


2 306 


5.4 


188 


3.3 


78 


1.39 


30 


.53 


10 


.18 




1914 


2 329 


6.5 


198 


3.9 


77 


1.52 


42 


.?3 


12 


.24 


Central Neutral Area 


1904 


2,1-12 


33.4 


1,117 


17.4 


798 


12.44 


184 


2.87 


43 


.67 




1909 


1,800 


32.0 


978 


17.4 


610 


10. 85 


165 


2.94 


47 


.84 




1914 


1,477 


29.2 


844 


16.7 


445 


8.80 


143 


2.83 


45 


.89 


Southeastern Neutral Area. 


1904 


1,041 


16.2 


678 


10.6 


310 


4.83 


42 


.65 


11 


.17 




1909 


978 


17.4 


664 


11.8 


261 


4.64 


40 


.71 


13 


.23 




1914 


1,002 


19.8 


696 


13.8 


248 


4.91 


45 


.89 


13 


.24 


Other States 


1904 
1909 


3 293 

3 2i8 


4.5 
4.5 


153 
133 


2.3 
2.3 


96 
80 


1.50 
1.43 


39 
29 


.60 

.52 


5 
6 


.08 




.11 




1914 


3 240 


4.8 


125 


2.5 


72 


1.42 


34 


.68 


9 


.18 



1 These figures do not inclule mills in the States of Massachusetts and Connecticut. 

2 These figures do not include mills in the States of South Carolina, Mississippi, and Louisiana. (See 
p. 25.) 

3 These figures include mills in Massachusetts, Coimecticut, South Carolina, Mississippi, and Louisiana. 

The table shows that the total number of commercial raiUs in the 
country fell from 6,413 in 1904 to 5,621 in 1909, and to 5,055 in 1914. 
This, in connection with the increase in total output, involved an 
increase in average production per miU from about 16,000 ^' barrels 
in 1904, to 18,697 in 1909, and 22,886 in 1914; an increase of 17 per 
cent from 1904 to 1909, and 22 per cent from 1909 to 1914. 

The increase in average production per mill from 1904 to 1914 is 
apparently due to the greater efficiency of the very large mills. The 
table shows that those producing 100,000 barrels or more increased 
in number from 166 in 1904 to 218 in 1914; that is, there is an in- 
crease during these 10 years of practically one mill for each three 
mills in that class in 1904. In that year there were only 26 of these 
mills in each thousand commercial mills in the entire country; in 1914 

31 The number of barrels given for 1904 is approximate. Since the census does not give a separate state- 
ment of output for mills making 1,000 barrels and over for that j-ear, it has been estimated by assummg that 
mills making less than 1,000 barrels had the same output per mill in 1901 as in 1909, and by deducting 
their output thus obtained from the output of merchant mills of all classes. 



GENERAL SUEVEY, 35 

their number had increased to 43 in each thousand. Their relative 
importance had increased nearly 70 per cent. 

During the same 10 years, mills having an output of 20,000 to 
100,000 barrels decreased in number from 622 to 540. These figures 
leave a question as to the line between the more efficient and less 
efFicient mills. Although there was a decrease of 82 mills in this class 
during the 10 years, it is not clear but the increase in the number of 
100,000-barrel mills may have been in considerable part made up 
by very efficient mills in the next lower class inci'easing their output 
during the 10 years up to 100,000 barrels. As already noted, the 
entire number of these mills decreased from 622 to .540, but the 
number per thousand commercial mills in the country increased from 
97 in 1904 to 107 in 1914: that is, their relative importance was 
increasing. 

The table apparently makes it clear that conditions were decidedly 
unfavorable to the class of mills making from 5,000 to 20,000 barrels 
of flour annually. Their number decreased from 2,123 in 1904 to 
1,377 in 1914. In other words, there were less than two of these 
mills in the' latter year where there had been three in the former. 
In 1904, of each thousand commercial mills, 331 were in this class; 
in 1914, only 272. 

Conditions appear to have been more favorable to mills making 
from 1,000 to 5,000 barrels annually. The table shows that their 
number decreased from 3,502 to 2,920, but that their number per 
thousand commercial mills increased from 5 16 to 578. 

Table 13 shows that mills of the largest size did not increase in 
number nearly so fast in the Northwestern Selling Area as in the 
Southwest. This was to be expected, not only because the rate of 
increase in flour output in the latter area from 1904 to 1914 was higher 
than in the former, but also because in 1904 this class of mills already 
constituted neaiiy 10 per cent of the commercial mills in the North- 
west, while in the Southwest they were still less than 4 per cent of the 
total. Nevertheless, the percentage figures for the Northwest show 
an increase of about 50 per cent in the relative importance of this 
class of mills, while there was practically no change for the next 
lower class and a decline of approximately 25 per cent for mills mak- 
ing from 5,000 to 20,000 barrels. The smallest mills classed as com- 
mercial in this report, those making from 1,000 to 5,000 barrels, 
fared as well or better here, than in the entire country, apparently 
increasing in relative importance about 10 per cent. 

The highest increase in relative importance shown for any group 
of mills by Table 13 is that of the 100,000-barrei class located in the 
Southwest. The increase in their percentage figure from 0.51 to 1.35 
indicates a growth relative to the entire output of the country of 
considerably over 150 per cent. It is possible, furthermore, that the 



36 COMMERCIAL WHEAT-FLOUR MILLING. 

20,000 to 100,000 barrel mills in the area would also be shown to have 
been decidedly prosperous if account could be taken of mills that 
passed from this class to the 100,000~barrel class during the 10 years. 
In this area, contrary to the general rule, the smallest mills, as well 
as those next larger, decreased in relative importance. 

In the Pacific Selling Area the 100,000-barrel mills increased in 
number from 8 to 11, their relative importance in 1904 and 1914 
being expressed by 0.12 and 0.22. While this area did not show so 
rapid an increase in the largest mills as the Southwest, it did show 
an increase in the next lower class from 36 to 40 mills. An increase 
in the number of mills in this class is found nowhere else except in the 
Southeastern Neutral Area. The change in miUs of the 5,000 to 
20,000 barrel class was similar to those in the two other sellmg areas. 
But in the smallest size mills there recurs the peculiarity, again shared 
by the same group in the Soutiieastern Neutral Area, of an increase 
in numbers, accompanied, of course, by a very considerable increase 
in relative importance. It appears probable that, as the above situa- 
tion suggests, the competition of the great commercial mills has had 
less influence in these areas than in other parts of the country. 

The data prepared by the Census Bureau on the classification of 
merchant flour mills according to output include Massachusetts, 
Rhode Island, and Connecticut in "Other States." It has, therefore, 
been necessary in this table to present data for the Eastern Buying 
Area exclusive of these States. In this area, which produces less 
than one-half the flour it consumes, the table shows a condition of 
things quite different from that which prevailed in the selling areas. 
For example, it shows that the 100,000-barrel class decreased in 
number from 20 to 17 mills, their relative importance to all miUs 
in the four classes showing no appreciable change. The 20,000 to 
100,000 barrel mills held their own very well, the decrease being 
only from 54 to 49 miUs. Nor is the change in the other two classes 
of any considerable importance. In other words, as might be 
expected from the fact that there has been no considerable change 
in the flour output of the area, we find no marked change in the 
classification of its miUs. It should be remembered, however, that 
the average production of the miUs left in this area was considerably 
more in 1914 than in 1904. 

Because the census data include the data for South Carolina, 
Florida, Alabama, and Louisiana in '/Other States," it has been 
necessary to exclude those States from the Southern Buying Area 
in this tabulation. The miUs in this area, for which the census 
does give data, show relatively smaU changes in classification. 
There were three more miUs of the 100,000-barrel class in 1914 than 
in 1904. This is due to the fact that at certain places it has been 
possible to develop a satisfactory large milling business, although 



GENERAL SURVEY. 37 

in the 20 years the flour output of this entire area, including the States 
left out in this table, increased only from 5.3 to 5.9 million barrels. 
The table shows that mills of the 20,000 to 100,000 barrel class 
maintained their number while there was a decrease in the number 
of miJls in the next lower class from 111 to 77, their relative impor- 
tance showed no such falling off as is shown in some other areas. 
Also, contrary to experience in other areas, the smallest mills de- 
clined in actual number more than 5,000 to 20,000 barrel mills and 
showed no increase in relative importance. 

The Central Neutral Area has more mills than any other area 
covered by the table. In 1904 it had a third of all commercial 
mills, but during the 10 years their number decreased from 2,142 
to 1,477, and in 1914 they constituted less than 30 per cent of the 
gi'eatly decreased total. Even in this area there was a net increase 
of two mills in the 100,000-barrel class. This increase in the most 
effective class of mills had but slight effect on the total production 
of the area, which, as shown on page 27, decreased from 30.6 to 21.6 
million barrels. In all other classes the reduction in number was 
considerable; from 184 to 143 in the 20,000 to 100,000 barrel class, 
from 798 to 445 in the 5,000 to 20,000 barrel class, and from 1,117 
to 844 in the 1,000 to 5,000 barrel class. 

The flour-mill industry has never been of considerable importance 
in the Southeastern Neutral Area, and such mills as are found there 
belong more generally to the neighborhood class than to the large 
commercial class. As a consequence, although this area produced 
less than 9 per cent of the country's total flour output in 1914, its 
commercial mills amounted to 19.8 per cent of the total. Neverthe- 
less, the apparent necessity for larger mills in order to compete to 
better advantage with the great western flour manufacturers has 
increased the number of miUs in the 100,000-barrel class from 11 
to 13 and in the 20,000 to 100,000 barrel class from 42 to 45, while 
in the 5,000 to 20,000 barrel class the number decreased from 310 
to 248. In this area the 1,000 to 5,000 barrel mills have, as already 
noted, escaped to some extent the effects of competition from the 
greater mills of the West. As a consequence their number has in- 
creased from 678 to 696 and their relative importance from 10.6 per 
cent of all mdls covered by the table to 13.8 per cent. It is inter- 
esting to note that the net increase of 3.2 per cent in the relative 
importance of all miUs in this class is exactly accounted for b}^ the 
same increase in this one area. 

In the remaining States there were only 293 mills in 1904, and in 
1914 their number had decreased to 240. Even in this area-, where 
the flour-miQing industry is so unimportant, the niunber of 100,000- 
barrel mills increased from 5 to 9, whUe in aU other classes there were 



38 CO^rMKRCIAL WHEAT-yi.OT'R MTLTJXO. 

decreases ranging from 5 in the next to the largest class ^ 24 In the 
5,000 to 20,000 barrel class. 

Concentration and competition. — It is not feasible in this report to 
do more than refer to some of the other factors besides location of 
the wheat fields that have entered into the steadily increasing con- 
centration of flour milling described above. The growth of great 
commercial and industrial centers has compelled the development of 
the commercial mill — ^the mill that ships flour into these centers. 
The commercial mill does not thrive unless it sells a standardized 
flour, and no mill can produce a standard flour, uniform year after 
year, unless it is able to draw wheat of the required quality from a 
distance when necessary. 

In spite, however, of the many factors tending to concentration 
there is no approach toward monopolistic control of the flour indus- 
try by any one concern. An attempt to form a great flour trust in 
1899 resulted in a complete failure. Later efforts to bring together 
the great Washburn and Pillsbury interest were unsuccessful. This 
does not mean, however, that big aggregations of capital are not 
meeting with success in the flour business. The measure of success 
is indicated by the published reports of such concerns. 

The Washburn-Crosby Co. is a corporation organized in 1889 to 
take over a milling business that had grown to large proportions in 
Minneapolis as a private enterprise. The mifls now operated by the 
company have a capacity of about 60,000 barrels per day. Operated 
to full capacity they could apparently produce a sixth of aU the flour 
consumed in the United States. 

The Pillsbury Flour MiUs Co. also carries on a business organized 
and successfuUy developed through many years of operation. Pub- 
lished figures indicate that its capacity is over half that of the Wash- 
burn-Crosby concern. 

The Standard Milling Co. difi'ers from the two already mentioned 
in that it does not have behind it years of successful development 
under individual ownership. It is a combination of a number of 
good-sized mifls located in widely separated sections of the country. 
Organized in 1900, it paid no dividends on its common stock until 
1912. Its published statements, however, report an increase in its 
surplus from Sl,317,181, in 1904- to $4,060,506 in 1917. Its com- 
bined capacity is considerably over 30,000 barrels per day. 

The Kansas Flour Mills Co. is said to have a capacity of about 
15,000 barrels per day, and there are a number of other companies 
whose capacity approaches or exceeds 10,000 barrels.^^ 

Apparently there are 10 miUing companies which could under pres- 
sure produce half the flour made in the United States in an ordinary 
year. But in no case does actual output make any near approach to 

n "Flour Mills," published by the Northwestern Miller, is the authority used as to the capacity of mills. 



GENERAL SURVEY. 39 

capacity. The estimated capacity of the country's flour mills is 
approximately two and one-half times the largest pioduction in any 
je&r. This surplus capacity, which is characteristic of small con- 
cerns, is undoubtedly an important obstacle in the way of the many 
factors working toward concentration and possible monopolistic 
control of the industry. 

Competitive methods. — In its preliminary report on flour milling 
and jobbing of April 4, 1918, the Commission commented on market- 
ing conditions and practices as follows: 

The Commission's investigation disclosed that competitive conditions in the in- 
dustry had developed some marketing practices on Ihe part of millers which were open 
to criticism, but none that were particularly vicious. Such practices as did exist 
have been largely done away with for the duration of the war by the regulations of 
the United States Food Administration. 

• * * * * * « 

One of the worst evils of the flour business is the multiplication of brands, many 
of which are not identified by the name of any concern. Heavily advertised brands 
usually bear the name of '.he manufacturer or the distributor, but there are a large 
number of brands sold ihat bear no name to which responsibility for poor quality can 
be attached. It is on such brands that price cutting is apt to be most objectionable. 

The pure-food law requires the correct weight to be put on the sack, but does not 
require the name of the manufacturer or distributor. It would undoubtedly make 
for much better marketing conditions in the industry if such identil.cation of all flour 
sold were required. 

The worst practice found among distributors was that of contracting ahead for as 
large a quantity of flour as the mills would sell, with the intention of calling for deliv- 
eries if the price went up but of repudiating their obligations if the price went down. 
This practice was almost entirely confined to more or less irresponsible concerns 
attracted into the business by the prospects of large profits. It has been effeclually 
prevented for the duration of the war by he regulations of ihe Food Adminisiration, 
which forbid mills to sell flour more than 30 days ahead of aciual delivery. 

After the issue of the report above referred to, and for a period 
extending beyond that covere 1 by the present report, the flour-miU- 
ing industry went so completely under the control of the Food Admin- 
istration both as to profits and methods of doing business that it did 
not seem necessary for this Commission to make further inquiry in 
this direction. 

Section 5. Millers' Associations. 

The Commission has made no investigation of the organization 
and practices of associations in the flour-milling industry. There 
are, however, certain facts, commonly known to the trade, which 
are worth noting in this report. Associations have been organized 
in at least 18 different States. (See Exhibit IV.) Most of these 
associations cooperate in interstate or international v/ork through 
the Millers' National Federation. Various other group or sectional 
associations are noted below with brief mention of the character of 
their activities. The flour trade also has local clubs in active opera- 
tion in a number of the larger cities. 



40 COMMERCIAL WHEAT-FLOUR MILLING. 

Millers' National Federation. — The proceedings of the 17th 
annual meeting of the Millers' National Federation, held in Chicago, 
April 11, 1919, indicate the character of the activities of the federa- 
tion. Plans for the operation of the mills of the country under the 
Wheat Director's administration of the wheat price guaranty law 
was the principal topic discussed by the convention. The fact that 
the report of the special legislative committee on this subject was 
presented by the former head of the milling division of the Food 
Administration is in itself significant of the federation's influence 
on matters that were of vital importance not only to the millers of 
the United States but also in their effect on the food supply of the 
country during the war. Other members of this special legislative 
committee were divisional chairmen of the milling division. 

It was reported to the convention that the audit of millers' accounts 
was taken up with the Enforcement Division of the Food Adminis- 
tration soon after the armistice was declared, and that an agree- 
ment was reached in January, 1919. On cancellation of the Food 
Administration regulation of contracts, December 23, 1918, the 
federation requested its members to continue to observe the same 
rules until the committee on these subjects could act. 

The secretary reported to the convention that it was believed that 
the committee regulations based on those of the Food Administration 
and issued early in 1919 had been quite generally observed. Con- 
siderable work had been done on export trade conditions, especially 
work relating to Cuban restrictions on imports of flour from the 
United States, and to improved port facihties for handhng flour. In 
addition to the above activities, other committees appeared to be 
continuing assignments including Federal and State legislation, 
transportation conditions, and grain standardization and inspection. 

Information in regard to the officers and committees of the federa- 
tion is given in Exhibit IV. 

Community Millers' Association of America. — MiUs of 300- 
barrel capacity and under have recently organized the Community 
Millers' Association of America. In their address to the Wheat 
Director, adopted at their annual meeting in May, 1919, they claimed 
that their association was " the only representative body of the small 
millers in this country." The ambitious character of this new asso- 
ciations activities is indicated by the following list of projects under- 
taken at this meeting: 

1. Presentation of wheat guaranty administration plan to Mr. Barnes (the Wheat 

Director). 

2. Insistence on representation of the smaller mills before Mr. Barnes on the same 

numerical basis as the large mills. 

3. Attack on the milling in transit systemi. 

4. Advocacy of Federal credit to community millers. 

5. Organization of the entire body of small millers, estimated to include 11 out of 12 

of all millers in the country. 



GEIvTERAL SURVEY. 41 

Those who have been most active iu establishing this new associa- 
tion are owners of self-contained small mills. The builders of such 
mills have also done much to get the association well started. How- 
ever, owners of standard type mills up to .300-barrel capacity were 
well represented at the recent convention. (See Exhibit IV.) 

The Millers' Export Association (Inc.) — This association was 
incorporated on July 22, 1919, for the purpose of promoting trade in 
American wheat flour in foreign countries and improving and devel-. 
oping facilities for the handling and transportation of wheat flour 
exports. It was the purpose of this organization to act as agent for 
its members in dealing with the United States Grain Corporation 
and governmental flour-buying agencies of other countries. The 
agreement under which it operated was canceled, however, as of 
May 20, 1920. (See Exhibit IV.) 

Other Associations. — The soft-wheat millers of the Ohio VaUey 
are organized in separate State associations, but their common inter- 
est in matters such as the margin allowed by the Food Administra- 
tion for converting wheat to flour brings them into joint convention 
occasionally. 

Southwestern millers also have their own peculiar problems which 
are divided between the Southwestern Millers' League, which has a 
very large membership among southwestern millers, and the Millers' 
Exchange located at Kansas Cit}^. Maintenance of the existing parity 
of freight rates and traffic regulations between different sections 
ajjpears to be the special task of the former; mutual insurance of 
sales contracts is undertaken by the latter. The league also distrib- 
utes information on State legislation and represents its members 
before various public bodies. The exchange, besides its contract 
insurance business, distributes a compilation of sales data, including 
prices which are reported by its members who are located principally 
in Kansas, Oklahoma, Missouri, and Nebraska. (See Exhibit IV.) 

The distribution of details of actual sales reported by their diflerent 
members also appears to be an important feature of the work of 
leading State associations, as for example, Ohio and Indiana. 

Association work on the Pacific slope is divided between the North 
Pacific and the South Pacific Associations. (See Exhibit IV.) 



Chapter II. 
COSTS, PRICES, AND PROniS. 

Section 1. Prices of wheat flour. 

The tables of relative prices of the Bureau of Labor Statistics of 
the United States Department of Labor afford interesting compari- 
sons between prices of wheat flour and other commodities. Broadly 
they indicate that during the advance in prices from the low level 
of the nineties there has been, relatively, a larger supply of food 
than of other commodities. Although the output of other com- 
modities has increased more rapidly than the output of food, demand 
for those commodities has apparently increased still more rapidly. 
Consequently, with a single exception in more than 20 years, the 
average relative wholesale price of the 15 articles of food included in 
the tables of the Bureau of Labor Statistics has each year shown 
less advance above the low level of the nineties than is shown by 
the average annual price of all commodities covered by the tables. 

Until 1915 flour generally shared with other foods this tendency 
to advance in price less rapidly than other commodities. Indeed, the 
flour prices published by the Bureau of Labor Statistics, both whole- 
sale and retail, for the four years 1911-1914 were relatively much 
lower than those of food in general. Beginning with 1915, however, 
flour prices advanced rapidly, with the result that in 1918 its relative 
wholesale price was apparently not only higher than the relative 
average wholesale price of food, but also higher than that of all other 
commodities. The indicated advance in relative retail prices had 
apparently not yet brought that for flour up to a level with those for 
other foods in 1919, but according to the latest available figures, in 
the spring of 1920 their relative advance above their average in the 
nineties would have equaled that for foods generally if the prices of 
sugar and potatoes had not advanced phenomenally. 

The course of flour prices during the five years covered by this 
report is of such interest as to warrant a comparison of the changes 
from year to year, not only for flour but also for wheat. The fol- 
lowing table shows retail, export, and wholesale prices of wheat flour 
per barrel for the mill years 1913-14 to 1917-18, inclusive; the average 
receipts per barrel for flour sold by 37 large commercial milling com- 
panies (see p. 57), their receipts for feed per barrel of flour sold, and 
the cost of the wheat they used in making a barrel of flour; the esti- 
mated receipts by farmers throughout the Unit-ed States for the same 
quantity of wheat and also their average receipts per bushel. 
42 



COSTS, PRICES, AND PROFITS. 



43 



Table 14. — Retail, export, and wholesale prices of wheat flour, millers' receipts for flour 
and feed, millers' cost of wheat, and farmers' receipts for wheat, per unit figures, 191S-14 
to 1917-18. 



Mill or fiscal year. 



1913-14 1914-15 1915-16 1916-17 1917-18 



Retail price per barrel ' /dollars 

\per cent.. 
Export price per barrel 2 (dollars . . . 

\per cent.. 
Wholesale price per barrel ' /dollars . . . 

mercent.. 
Millers' receipts for flour per barrel ' /dollars. . . 

\percent.. 
Millers' receipts for feed per barreH /dollars.. . 

(per cent.. 
Millers' receipts for flour and feed per barrel . /dollars .. . 

\per cent.. 
Millers' cost of wheat per barrel /dollars . . . 

(percent.. 
Fanners' receipts for wheat per barrel s /dollars. . . 

\per cent.. 
Familrs' receipts per bushel « /dollars .. . 

\per cent 

Index number 



5.76 
100 

4.61 
100 

4.22 
100 

4.15 
100 
.77 
100 

4.92 
100 

3.96 
100 

3.50 
100 
.79 
100 

100 



7.41 
129 

5.86 
127 

6.02 
143 

5.55 
134 
.84 
109 

6.39 
130 

5.42 
137 

4.47 
128 
.99 
125 

131 



7.20 
125 

5.63 
122 

5.61 
133 

5.25 
127 
.77 
100 

6.02 
122 

5.09 
129 

4.45 
127 
.98 
124 

125 



10.92 

190 
7.80 

169 
9.98 

237 
8. 55 

206 
1.26 

164 
9.81 

199 
8.32 

210 
6.62 

189 
1.44 

182 

198 



12.54 

218 

11.19 

243 

10.53 

250 

10.22 

246 

1.30 

169 

11.52 

234 

9.72 

246 

9.10 

260 

2.05 

260 

239 



1 Data from Bureau of Labor Statistics of the Department of Labor. 

s Statistical Abstract of the United States, 1918, p. 575. 

3 Avera<;e receipts per barrel received by 37 large commercial milling companies. 

* Average amount received from sales of feed per barrel of flour sold by 37 large commercial milling 
companies. 

6 Average receipts per bushel multiplied by the number of bushels used per barrel of (lour by 37 large 
commercial milling companies. 

6 Monthly Crop Report, Department of Agriculture, October, 1918, p. 127. 

Any comparison of the course of flour prices during the period 
covered by the above table must rest primarily on the relation of 
flour prices in 1913-14 to prices of other commodities and to former 
prices of flour. It has already been noted that during the four-year 
period, 1911-1914, prices of flour were much below the general level of 
prices. The fact that in 1913-14 they were still at a low point is 
emphasized by noting that wliile the millers' receipts for flour per 
barrel shown in the table is only S4.15, the average mill value of flour 
produced in 1889, according to the reports of the Bureau of the 
Census, was S4.33. This comparison alone, however, might lead to 
misapprehension if account is not taken of the fact that during the 
low-price decade of the nineties flour prices declined more rela- 
tively than other prices and their decline continued throughout a 
longer period, with the consequence that the average mill value of 
flour made in 1899, according to the Census, was only $3.35. Rec- 
ognition of the relatively low price of flour in 1913-14 renders the 
considerable increase from that year to 1917-18 less striking than it 
would be if flour prices of the first year of the period were relatively 
as high as prices of other commodities. 

In order to get a broad view of the changes in the closely related 
group of prices in Table 14, index numbers have been computed by 
adding together the prices shown for each year and dividing the 
totals for the last four years by the total for 1913-14. These index 



44 COMMBRCnAT, WHEAT-FLOUR MILLING. 

numbers indicate a general advance of 139 per cent for the related 
prices in the group covered by Table 14 during the five years from 
1913-14 to 1917-18. The advance of 31 per cent in the second year 
of the period was, of course, due to a sudden increase in demand 
following the opening of the European war in the summer of 1914. 
Events proved that under ordinary conditions of ocean transporta- 
tion there would be an abundant supply of wheat and flour for the 
warring nations of Europe. This is indicated by the fall in the index 
numbers of Table 14 from 131 during the first year of the war to 125 
diu^ing the second year. The result of the above conditions is that 
during the first two years of the war prices of flour and wheat show 
a relatively small advance compared to those of the last two years 
covered by the table. 

The year 1916-17 opened with prices still at a relatively low level. 
Em'opean Governments, however, all recognized the fact that there 
would probably soon develop conditions in ocean transportation 
which would limit their practically available sources of wheat flour 
to the American continents and, in a considerable degree, to North 
America. Largely due to theu* provision for this emergency by con- 
tracts for wheat and flour for future delivery a scarcity of cash wheat 
developed which resulted in the flour and wheat panic of the spring 
of 1917. The effects of this panic are shown in the increase in the 
averageretail priceof flour from S7.20 in 1915-16 to S10.92 in 1916-17 
and in the index number for all the items from 125 in the former to 
198 in the latter year. 

The data showTi in the table for 1917-18 are typical of conditions 
in the wheat and flour market of the United States under Govern- 
ment regulations during the war. Although the index number 
shows an increase of 20 per cent over the preceding year, if compari- 
sons were made with prices at their high point in the last half of 
1916-17, a decrease would be shown instead of an advance. 

Table 14 shows that the retail price of flour as represented by the 
Minneapolis and Kansas City data of the Bureau of Labor Statistics 
advanced from $5.76 in 1913-14 to $12.54 in 1917-18. This increase 
of nearly $7 in the price is indeed striking, but comparison with the 
index number for the group shows that the retail price advanced 
only 118 per cent in comparison with 139 per cent for the group as a 
whole. To put the contrast more strongly, the advance shown for 
the retail price of flour is considerably less than is shown for any 
other item in the table except millers' receipts for feed. The changes 
in prices at retail from year to year were similar to those indicated 
for the group as a whole. In each year the tendency of retail prices 
to lag behind wholesale and manufactm-ers' prices is evident. For 
example, although millers' receipts for flour were 34 per cent higher 
in 1914-15 than in the preceding year, the advance in the retail price 



COSTS, PRICES, AND PROFITS. 45 

was only 29 per cent, but in the following year although millers' 
receipts, as indicated by the index number, went down from 134 to 
127, the retail price declined only from 129 to 125. At this point 
it showed exactly the same advance from the 1913-14 level as is 
shown by the index number for the entire group. In 1916-17 it 
again failed to keep up with the advance in other prices, although 
as the table shows its index number for that year is only 8 points 
below that for the group as a whole. Dm-ing the critical war year, 
1917-18, the retail price showed no such advance as other prices in 
the table. This is indicated by an iijcrease of only 28 points in its 
index number in comparison with an increase of 41 points for the 
group as a whole, and of 78 points in farmers' receipts per bushel of 
wheat. 

According to Table 14 the average price of flour exported from the 
United States advanced from S4. 61 in 1913-14 to S11.19 in 1917-18. 
Its index number shows an increase of 143 per cent or 4 points in 
3xce3s of the index number for the group as a whole. It is interesting 
to note that this last year of the war, when the attention of the 
Government was of necessity brought to bear on the situation in the 
flour market, is the only year in which export prices show as great 
an advance as the group as a whole. In the years 1914-15 and 
1915-16 the differences between the increase in export prices and 
average prices for the other items was not particularly notable, 
although in the former year the export price fell below the average 
wholesale price and in the latter year was only 2 cents above it. 

It is the year 1916-17, however, w^hich affords the most striking 
contrast between the movement of the export price and other prices 
in the group, as is indicated by an advance of only 47 points in the 
export price index number in contrast with an advance of 73 points 
in the index number for the group as a whole, and of 104 points in the 
wholesale price shown in the table. This is, of course, the result of 
the large contracts for futm'e delivery purchased by foreign buyers in 
the early part of 1916-17, to which reference has already been made. 

Foreign trade statistics of the Bureau of Foreign and Domestic 
Commerce afford an interesting illustration of the advantage derived 
by England from the correct forecast of future demands for flour by 
its representatives. These statistics show that the average export 
price on flour sent to England in 1916-17 was 66 cents per barrel 
less than on that sent to other countries, but that in the following 
year it was 5 cents per barrel more. Turning again to the general 
averages, it is interesting to note that in 1916-17 the export price 
was 75 cents per barrel less than the average millers' receipts for 
flour shown in the table, while in 1917-18 it was 97 cents per barrel 
more. 



46 COMMERCIAL WHEAT-FLOUR MILLINO. 

Table 14 shows an increase in the wholesale price, also based on 
the Minneapolis and Kansas City data, from S4,22 in 1913-14 to 
$10.53 in 1917-18. This is an advance of 150 per cent, or somewhat 
more than the advance for the group as a whole. The difference, 
however, is not more than may be accounted for through the spe- 
cialized character of the wholesale price as compared with prices for 
the entire group. The difference between the wholesale price and 
the average receipts of the millers is still narrower if the advance in 
prices over the entire period is taken, since there is a variation of 
only 4 points between the index numbers for the two prices in 1917-18. 
Nevertheless, the increase in the margin between the wholesale 
prices and the millers' receipts from 7 cents in 1913-14 to 31 cents 
in 1917-18 should be noted. A comparison of the intermediate 
years indicates, however, that the margin between the wholesale 
price and the millers' receipts in 1913-14 was probably exceptional, 
yet hardly so much so as the difference of SI. 43 found in 1916-17. 
The low relative receipts of the millers as compared with the whole- 
sale price in 1916-17 is apparently due to contracts for future deliv- 
eries in that year of rapidly advancing prices which have already 
been mentioned as responsible for the low index number for the 
export price. 

Average millers' receipts should in general be almost as good an 
index of fluctuations in the price paid as wholesale prices per barrel 
and, as already noted, the advances in the wholesale price and in 
millers' receipts over the entire period were practically the same. 
The actual cost of flour during these years was in all probability 
somewhere between millers' receipts and the wholesale price shown 
by the table, since the price paid must include freight and middle- 
men's charges in addition to millers' receipts whenever the flour is 
handled by the wholesale merchant. 

Millers' receipts for feed show the smallest advance of any item 
included in the table. The figure for 1917-18 is hardly 70 per cent 
in advance of that for 1913-14, the indicated increase in price being 
barely half that shown for the group as a whole. 

Neither millers' receipts for flour nor for feed alone afford an index 
to the effect of price changes on the prosperity of the millers. A 
better index is found in the fluctuations of the combined receipts for 
flour and feed. Table 14 shows that tliis amount advanced less, 
relatively, than average prices for the entire group in every year 
except 1916-17. For the five-year period its advance was only 134 
per cent, as compared with 139 per cent for the group as a whole. 
This difference is, of course, so small that it can not be accepted as 
an indication that the miller's receipts in general did not keep fairly 
in line with the advance in prices paid by him for his raw material 
and received by the merchant on resale of flour. It is true that the 



COSTS, PRICES, AND PROFITS. 47 

general indication of the table is that wholesale prices advanced 
more rapidly than the miller's receipts for his entire product. This 
difference would have been much less in some years if wholesale 
prices had been compared with the miller's receipts from domestic 
sales instead of with his combined receipts from exports and domestic 
sales shown in the table. 

An interesting feature of Table 14 is the narrow margin between 
the cost of the wheat used in producing a barrel of flour and the 
average receipts of the miller for that flour. In 1914-15 this margin 
was only 13 cents, yet it will be shown later that that was a relatively 
prosperous year for the miller. The explanation is in the high price 
of feed in 1914-15 as compared with the preceding and following 
year. In 1915-16 receipts for flour exceeded cost of wheat by 16 
cents and in the first year of the period by 19 cents. In 1916-17, a 
year of great prosperity for the miller, his receipts for flour exceeded 
the cost of wheat by only 23 cents. The table shows, however, that 
under Government regulation in 1917-18 this difference was increased 
to 50 cents. The necessity of this greater margin in 1917-18 is at once 
evident if it is noted that there was an increase of $1.40 in the miller's 
cost of wheat but an increase of only 4 cents in his receipts from the 
feed made from that wheat. 

A better test of the relation of the miller's cost of wheat to his pros- 
perity is found by comparing the relative advance in the cost of his 
wheat with his combined receipts for flour and feed. Table 14 shows 
that while the cost of his wheat advanced 146 per cent during the 
period, his combined receipts increased only 134 per cent; that is, he 
was in a somewhat less favorable condition in regard to the cost of 
his raw material in 1917-18 than he was in 1913-14. Comparison 
of the figures throughout the period, however, indicate the possi- 
bility that the cost of wheat to the miller in 1913-14 may have been 
exceptionally high, since there is an increasing tendency for the ad- 
vance in total receipts to fall behind that of cost of wheat from year 
to year. 

Prices paid the farmer for his wheat advanced more slowly than 
the other prices in the table until 1917-18, in wliich year the Govern- 
ment-stabilized price of wheat shows an advance of 160 per cent 
above the 1913-14 level, in contrast with the 139 per cent advance 
for the group as a whole. A more interesting comparison, however, 
is that between the farmer's receipts for the quantity of wheat put 
into a barrel of flour and the cost of that same quantity to representa- 
tive millers. To illustrate, the table shows that in 1916-17 this wheat 
cost the miller 110 per cent more than it did in 1913-14, but the 
farmer, according to the table, got only 89 per cent more for it. The 
margin between the farmer's receipts and the miller's cost in 1913-14 
had been only 46 cents, but in 1916-17 it had increased to $1.70. 



48 



COMMERCIAL WHEAT-FLOTJR MILLING. 



In making these comparisons it must always be remembered that 
the wheat price used is an average estimated price for all wheat sold 
in the United States, while the miller's cost is based on purchases of 
less than 30 per cent of the total crop. It is probable, however, that 
the receipts of the farmer for the 30 per cent and for the entire crop 
over a series of years will have a nearly parallel movement. Com- 
parisons based upon the data in Table 14, therefore, merit consider- 
ation so long as better sources of information are not available. 

Keeping the above limitations on the data in mind, the following 
table of relatives based on millers' receipts, millers' cost of wheat and 
farmers' receipts for wheat is instructive: 



1913-14 



1914-15 



1915-16 



1916-17 



1917-18 



Millers' receipts... 
Millers' wheat cost , 
Farmers' receipts. . 
other wheat costs . 



100 
80 
71 



100 
85 
70 
15 



100 
85 
74 
11 



100 
85 



100 



Because of the Government's stabilization of wheat prices through- 
out the country in 1917-18 the figures for that year are unquestion- 
ably more worthy of confidence than those for the other years. The 
general showing, however, that transportation expenses, storage 
charges, and the profits of the wheat holders constituted practically 
twice as large a part of the consumer's price of flour in 1916-17 as in 
1913-14, appears altogether probable. Furthermore, the increase 
in relative farmers' receipts from 68 in 1916-17 to 79 in 1917-18 is 
fairly positive proof of the advantage to the farmer of Government 
regulations during the war so far as such regulations affected flour 
and wheat. It would be entirely unwarranted, however, to assume 
that the relation of these figures to each other is any exact measure 
of the benefit received by the farmer. Increased costs of transporta- 
tion and storage accounted for part of the greatly increased difference 
between farmers' receipts and millers' costs in 1916-17, but most of 
it was unquestionably absorbed by the holder of wheat during the 
panic that reached its climax in May, 1917, when wheat was sold in 
Chicago for S3. 45 per bushel. 

The extraordinary speculative margin shown above for 1916-17 
sales calls for close observation of the relation of farmers' receipts 
to millers' costs in other years. According to the Department of 
Agriculture the farmer was getting 99 cents a bushel for his wheat 
on July 1, 1912, and only 79 cents nine months later. The Commis- 
sion has incomplete data pointing to a margin between farmers' 
receipts and millers' costs in that year of about 20 cents per baiTel; 
that is, the 20 per cent decline in wheat prices had reduced the 
margin to a minimum. Speculative holding of wheat that year, 



COSTS, PRICES, AND PROFITS. 49 

whether bj farmer or trader, was unprofitable. The trend of the 
market in 1913-14 was again downward, and the farmers' price fell 
from 81.4 cents at the beginning to 76.9 cents at the end of the year. 
The margin between farmers' receipts and millers' costs that year 
was 46 cents. The much smaller decrease in the farmers' price 
during the year had allowed the margin to double, but still kept it 
relatively small. 

These two succeeding years of declining prices, together with the 
advance of the farmer's price to $1,078 on January 1, 1915, in the 
face of a crop over 125 million bushels larger than had ever before 
been raised in the United States, sufficiently explain why the farmers 
sold 615 million bushels of wheat in the first six months of 1914-15 
and had only 189 million bushels left to sell in the other six months 
of the year. The consequent small sales in the next four months 
resulted in an advance of the farmer's price to $1,396 on May 1, 1915. 
On account of the early marketing of the crop, however, although the 
average cost to representative commercial millers was $5.42, farmers 
throughout the country received on an average only $4.47 for the 
quantity of wheat used in a barrel of flour. The relation between 
the advancing price and the increased margin seems clear. 

The influence of these heavy speculative gains is evident in the 
relatively smaller sales by farmers in the early part of 1915-16. But 
the billion-bushel wheat crop of the United States, reinforced by 
extraordinary increases in the production of Canada and Australia, 
drove the farmer's price down from $1,396 on May 1, 1915, to $1,025 
on May 1, 1916. The margin between the farmer's receipts and the 
miller's costs dropped back, as was to be expected, from 95 cents in 
1914-15 to 64 cents in 1915-16. 

The farmer must have been strongly impressed by the losses on 
speculative holdings of the 1915 harvest. His wheat marketing in 
the fall of 1916 was relatively heavier than it had been even in 1914. 
The average farm price on August 1, 1916, was $1,071 and his sales 
that month amounted to 111 million bushels. Consequently, 
although the average farm price went up to $2,485 on June 1, 1917, 
he had only 13 million bushels left to sell that month. The effect on 
the margin between the farmers' receipts and millers' costs has 
already been noted. The farmers of the United States would 
probably have held much of the wheat they sold in the early part of 
1916-17 if they had known as much of prospective ocean transpor- 
tation conditions as was known by European purchasers of wheat 
and flour. 

This brief review of price fluctuations shows the cause of the profit 
reahzed tu holding wheat of the 1914 and 1916 crops, and also 
explains why the farmer could not have been expected to store his 
183256°— 20 4 



50 COMMERCIAL WHEAT-FLOUR MILLING. 

wheat and share m this speculative gain. It should not be forgotten, 
however, that storage, transportation, and incidental charges were 
also advancing. 

Section 2. Cost of selling flour. 

Mill sales. — Fluctuations in the price of flour, such as those dis- 
cussed in the preceding section, are by no means entirely due to 
changes in the costs and profits of the millers. The flour trade of 
the country must be taken into consideration as well as the flour 
industry. The large toll paid to the railroads, already referred to 
on page 11, also constitutes part of the costs of distribution included 
in the price paid by the consumer. 

The mills, of course, are engaged in the flour trade. Many sell 
direct to consumers, many seU to bakers. Some distribute large 
quantities of flour to the dealers through their branch houses. 
Unfortunately the accounts examined by the commission were not 
in sufficient detail to permit a satisfactory segregation of selling 
expenses from the general expenses. Therefore, they are included in 
the general expense of operation in the discussion of millers' costs. 

The question of the cost of distribution has, however, assumed 
special importance in the relations between the Food Administration 
and the millers. In fact, it was necessary to establish certain con- 
tract allowances for the different trade services of the miller to differ- 
ent classes of customers. These allowances, of course, are intended 
to cover profits as well as costs. Furthermore, it is probable that 
they are considerably above a normal average charge for the services 
which they cover. Otherwise, a large number of mills, whose costs 
are above the average, might have been driven out of the business, 
and it has evidently been the purpose of the Food Administration 
and the Grain Corporation to put no regulations into effect which 
would be injurious to business concerns on whose services consumers 
in their own immediate vicinity were dependent in normal times, 
unless public interest compelled them to do so. 

The charges allowed in the contract between the Grain Corpora- 
tion and the millers are of practical importance, however, even 
though they represent a presumable maximum of costs and reason- 
able profits in the selling of flour at wholesale and retail. For that 
reason they are shown below: 

Per barrel. 

Deliveries in carload lots $0. 15 

Deliveries in mixed carloads (part flour, part feed) 40 

Sales from cars or docks, car lots (not delivered) of flour forwarded 

"on consignment" 40 

Sales from cars or docks, less than carload (not delivered) of flour 

forwarded ' ' on consignment " 50 

Sales in less than carload lots (not to consumer) 65 

Sales to consumers (not bakers or public eating places) L 35 



COSTS, PRICES, AND PROFITS. 51 

The floitr trade. — ^Aside from the mills and their branch 
houses, the flour trade includes many wholesale grocers, most retail 
grocers, brokers, and car-lot and less-than-car-lot flour jobbers. As 
the milling of flour has concentrated in the hands of the larger 
concerns the quantity of flour sold by mill agents and mill branches 
has increased, and the flour business of other distributors has de- 
creased. An increase in the number of bakers able to buy in car- 
load lots directly from the mill has also cut down the sales of other 
distributors. Many small bakers continue to buy of their local job- 
bers because they obtain credit from them that the mills are not 
willing to grant. 

The flour trade performs the usual functions; that is, it takes 
care of the transportation, storage, and deliveries of flour, and grants 
credit to purchasers. Storage in the flour trade tends to decrease; 
direct deliveries from cars to small traders and consumers to increase. 
Cartage, the largest single item of expense, and other delivery charges 
are advancing. Very little credit is granted in the car-lot business, 
but losses on account of bad debts have in the past been a consider- 
able item in the accounts of jobbers who sold to small local bakers. 

The margin between purchase and sales prices for different dis- 
tributors and at different times has little consistency. Big jobbers 
whose business operations do not extend to storage and cartage, 
usually have small expenses, and at times their margin is small — 
much smaller than that of equally large operators who, in addition 
to customary trade services, blend the flour of different mills to pro- 
duce the qualities demanded by their trade. Occasionally, the 
profit of the first class of jobbers referred to above will contain a 
large amount of speculative gain, resulting in a margin much greater 
than that of concerns whose expenses cover the semi-iadustrial 
operations involved in blending, testing, warehousing, handling, and 
lightering. 

Grocers' flour trade. — Practically all the flour consumed in 
individual households is sold by retail grocers. The retail grocere 
themselves buy much of this flour from wholesale grocers but, also, 
a considerable part of it directly from the millers. There is, however, 
in most cases, no satisfactory method of separating the grocer's 
flour expenses from his other expenses. For this reason, and because 
of the magnitude of the work, it was not deemed advisable to un- 
dertake to determine the margin of profit on sales of flour either in 
the wholesale or retail grocers' trade. 

Car-lot flour jobbing. — The accounts of five car-lot jobbers 
selling in the aggregate from a million to a million and a half barrels of 
flour annually were examined over a five-3'ear period. The business 
of these different concerns varied so greatly and, in the last of the 
five years, business in flour substitutes was so confused with wheat- 



52 COMMERCIAL WHEAT-FLOUR MILLING. 

flour business, that no statistical presentation of costs and profits 
for this group has been attempted. 

The data show, for example, that receipts for one very large car-lot 
jobber increased from .|4.59 per barrel in the calendar year 1914 to 
$13.24 in 1917 — an increase of 188 per cent over the period. The 
sales of another car-lot jobber doing a good business showed an 
increase in net receipts per barrel from $4.56 to $9.04, an increase 
of less than 100 per cent. It is evident that such data could not be 
combined unless they were sufficiently comprehensive to give assur- 
ance of representative results, and this was not the case. 

It is of interest to know, however, that the business of the first 
jobber referred to above, which is apparently typical of a limited 
group of similar large concerns, was done on an expense of 4 cents 
(no allowance being made for proprietors' salaries) and a net profit 
of 10 cents per barrel in 1914; and that these figures had increased 
respectively to 7 cents and 46 cents in 1917, dropping back to 5 
cents and 14 cents in 1918. The large profit in 1917 was undoubtedly 
due to the highly speculative conditions of that year. 

Car-lot jobbing expenses for individual concerns, according to the 
accounts examined, varied from the 4 cents per barrel in 1914, 
already noted, to 37 cents per barrel for a blending concern over a 
17-months' period from August 1, 1917, to December 31, 1918. 
Excluding the extreme figures just noted, expenses shown by the 
different accounts ranged from 5 cents to 16 cents in 1914 and from 
6 cents to 19 cents in 1918. 

All accounts showed a relatively high net profit in 1917. The 
business as a whole probably made twice its normal profit in that year. 
None of the concerns showed a net loss in any of the five years. In 
fact, tha minimum profit did not fall below 10 cents per barrel, but 
in a great majority of cases it was less than 20 cents per barrel. 

On the whole the accounts examined indicate that the normal 
gross margin for car-lot jobbers ranged between 15 and 40 cents per 
barrel, largely depending on the nature of the business done by the 
different concerns. In 1917, however, the gross margin shown in 
the accounts examined ranged from 30 cents to 59 cents per barrel. 
In 1918 margins were more normal, the accounts showing 18 cents 
as a minimum and 50 cents as a maximum. 

Less than car-lot jobbing. — The Commission examined the 
accounts of New York jobbers selling flour in less than car lots, 
whose sales in the aggregate exceeded 2,000,000 barrels annually. 
The character of the business done by the different concerns varied 
greatly. The relations of certain concerns with the big mills distin- 
guished their business sharply from that of their competitors. Others 
confined their sales almost entirely to small bakers. Because of 
difference in customers and services rendered them, there was a 



COSTS, PRICES, AND PROFITS. 



53 



considerable variation in prices, profits, and expenses. One small 
concern showed a net loss of 21 cents per barrel in 1917, while the 
others showed net profits ranging from 13 cents to 94 cents. 

Because of these differences in the character of the business done by 
different concerns, and because methods of accounting did not make 
a satisfactory segregation of flour receipts and expenditures possible, 
the figures presented below should not be regarded as typical of all 
jobbing sales in less than carload lots, nor as exactly accurate for the 
business covered. Tliey do, however, cover so large an amount of 
business and with such an approximation to the actual results of 
business done in flour alone, that there can be but little C[uestion of 
their practical utility for comparative purposes. 

Table 15. — Average receipts, costs, gross margin, expense, and profit on certain New 
York jobbers' sales of wheat flour in less than carload lots, by years, 1914-191S. 



» 

Calendar years. Sales covered. 


Receipts. 


Flour 
costs. 


Gross 
margin. 


Expense. 


Profit. 


1914 


Barrels. 
1,6',H,C07 
2,124,703 
2,357,761 
2, 129, 858 
2,550,439 


$4.86 

6.43 

6.65 

10.85 

11.47 


$4.45 
6.00 
6.10 
10.06 
10.92 


Cents. 
41 
43 
55 
79 
55 


Cents. 
25 
27 
32 
44 
39 


Cents. 
16 
16 
23 
35 
16 


1915 


1916 


1917 


1918 





The table shows that just before the war wheat flour was selling 
to small traders and to bakers in New York City for a little less than 
S5 per barrel. There was some fluctuation in the flour market on 
f-»e one hand because of the increased European demand directly 
after the outbreak of the war and on the other hand because of the 
larger wheat crops in Canada and Austraha in 1915. The net effect 
of these fluctuations on the New York flour market for 1915 and 
1916 appears 'to have been an advance of about 33^ per cent in the 
prevailing wholesale prices of flour in those two years as compared 
with prewar prices. The price shown for 1918 was 135 per cent 
higher than that shown for 1914. This probably indicates with a 
fair degree of accuracy the upper limit of the war's influence on whole- 
sale prices in New York City. It is interesting to note that while 
the rate of increase shown here for the New York price over the five- 
year period was less by 14 per cent than the rate shown for the whole- 
sale price of flour in Table 14, the amount of increase was $6.61, or 
30 cents more than the $6.31 shown in that table. 

The table shows the jobber's purchase price for flour advancing 
at a more rapid rate than his selling price. As a result, during the 
five years covered, the margin between costs and receipts advanced 
barely 35 per cent. In the exceptional year, 1917, it was not far 
from double what it had been in 1914. 



54 COMMERCIAL WHEAT-FLOUE MILLING. 

Just as purchase price encroached on price received, expenses 
encroached on margin realized. Consequently, in spite--of the in- 
crease of 35 per cent in the margin the net profit shows no change. 
In 1914 and in 1915 it had been 16 cents per barrel and although 
it advanced to 35 cents in 1917, in 1918 it fell to 16 cents again. 

Probably the most important showing of the table, and the one 
that can be accepted with the most confidence, is the increase in 
expenses of fully 50 per cent, from 25 and 27 cents in the fu-st two 
years to 44 cents in 1917 and 39 cents in 1918. It should be noted 
that the excess of expense in 1917 over 1918 was probably due to 
charging off an accumulation of bad debts in that year. 

The accounts of several Boston jobbers who sold flour in less than 
car lots were examined. They are open to the same criticisms as 
those made in regard to data collected in New York, but they, never- 
theless, substantiate in a general way the conclusions in regard to the 
course of prices, costs, and profits drawn from the table on page 53. 
Where there are differences of any moment in the first three years 
they are quite clearly due to the exceptional results obtained by 
one or two concerns either in one city or in the other. In 1917, 
however, three or four New York concerns made very high profits 
and there is little doubt that (including these exceptional cases) less 
than car-lot jobbing was more profitable in New York in 1917 than 
it was in Boston. 

Some data on flour jobbing in less than car lots were obtained for 
other large cities east of the Mississippi River. Tliese also support 
the more comprehensive data obtained for New York. Larger profits 
in 1917 and in 1918 were found in some other cities than in New 
York. It was not clear, however, that the differences might not be 
due to differences in the character of the business done. 

Section 3. Flour-mill accounts. 

The success of cost and profit inquiries of necessity depends on 
the completeness and accuracy of the records and accounts of the 
concerns whose costs and profits are examined. Since the rate of 
profit on investment is of prime importance no strictly accurate 
report on flour-mill profits in the United States can be made unless 
the amount of capital invested can be determined with a fair degree 
of accuracy. The experience of the accountants of the Commission, 
however, indicates that large numbers of milling concerns in the 
United States have no records from which their investment in mill 
building and flour plants could be correctly ascertained. One of 
the largest milling concerns east of the Mississippi when first visited 
by the Co mmi ssion's accountants had no amount on its books repre- 
senting investment in land, buildings, or machinery. 

No satisfactory report on profits per barrel of flour for the entire 
country can be made as long as it is impossible to determine the 



COSTS, PRICES, AND PROFITS. 55 

quantity and value of flour sold by the different mills; yet the Com- 
mission found mill after mill whose record of sales made no distinc- 
tion between flour, feed, and other products prior to beginning their 
reports to the Food Administration. It was, therefore, necessary 
to separate a large volume of flour sales from sales of other products 
in order to obtain sufficient price information to be fairly represen- 
tative. 

In the matter of costs a seemingly insurmountable obstacle was 
encountered in mill after mill because flour, feed, and other products 
had not been segregated in the inventories. In less frequent cases 
the same difficulty was met in inventories of raw materials. Only 
through the cooperation of the millers were the accountants finally 
able to make these segregations in a sufficient number of mills to 
meet absolutely necessary requirements. Other difficulties with 
the accounts were also encountered. Items of overhead expense, 
such as depreciation, bad debts, etc., were ignored for several years 
in some cases and then adjusted in a single year. Instances were 
also found where the records pertaining to interest, insurance, and 
taxes were not definite with respect to the period covered. 

Furthermore, cost accounts were seriously vitiated by the use of 
market value in the place of actual or average cost of grain, flour, 
and sacks in taking inventories. This bad accounting practice was 
defended as offsetting to some extent the equally bad practice of 
increasing or decreasing profits by the estimated profit or loss on 
unfilled orders. The latter practice is the more to be condemned 
because it transfers profits or losses from the year in which they are 
realized into the preceding year, while continuing to show the sales 
in the year in which the delivery is made. It was fortunately found 
possible, however, to place the wheat and flour inventories of the 
important companies on an approximate cost valuation, and all 
estimates of gains or losses on unfilled orders were rejected. 
• The Commission found that, on the whole, mill records for 1916-17 
and 1917-18 showed a distinct improvement over those for the 
earlier years. Furthermore, there was a decided disposition on the 
part of the millers to carry the matter forward to a point where the 
accounts would show in some detail their actual operating results. 

The year 1917-18, however, brought additional accounting prob- 
lems due to the cooperation of the millers with the Food Administra- 
tion. These complications affected the Commission's inquiry in 
two ways: First, a number of the Commission's accountants in 
cooperation with the Food Administration gave their entire time 
for several months to the monthly operating reports of the millers 
which were being made out to comply with the Government regula- 
tions. This work was continued until it was found that the Food 
Administration would be able to dispense with such assistance. 



66 COMMERCIAL WHEAT-FLOUR MILLING. 

Second^ the Food Administration's requirement of a separate account- 
ing period running from September 1 or 10, 1917, to June 30, 1918, 
produced further compHcations in the accounts. This made it 
somewhat more difficult for the Commission to obtain data for the 
year 1917-18 that would be strictly comparable with information 
already collected for the preceding four years. Furthermore, the 
increase in the millers' accounting work because of their cooperation 
with the Food Administration made it desirable to reduce the time 
spent in the mill offices and the scope of the reports required from 
milling concerns to the lowest possible limit. 

The problem presented to the Commission was the preparation 
of a report on the prices, costs, and profits of commercial flour mills 
during the years 1913-14 to 1917-18, which would furnish informa- 
tion of some practical value while at the same time due consideration 
was given to the situation outlined above. 

Section 4. Scope of inquiry into costs and profits. 

The conditions discussed in the preceding section called for a 
careful delimitation of the Commission's report on costs and profits 
in the flour-mill industry. Custom mills have no influence in the 
general commercial flour market, and therefore their costs and profits 
are immaterial in the consideration of the course of flour prices in 
commercial markets. The same is true of merchant miUs whose 
average output, including custom work, amounts to only four or 
five barrels of flour per day throughout the year. 

Passing to mills of considerable size. Table 13 shows that there 
were 4,297 concerns making from 1,000 to 20,000 barrels annually in 
1914. An account of their operations would no doubt add to a com- 
plete comprehension of the situation as it exists at the present time, 
but the great number compared with the quantity of flour produced 
and the great difficulty in obtaining the data made it inadvisable 
to attempt to cover them. 

Quite a difl'erent situation is found in the case of a few hundrea 
large mills whose adaptation to the milling conditions existing in 
the United States for the past 20 years or more has enabled them 
generally to do a profitable business at prices which have been 
graduafly eliminating a considerable proportion of their small com- 
petitors. It would have been desirable, therefore, to have had a 
full report on the operations of all mills making, say, above 200 
barrels of flour per day. This, however, was found impracticable. 

The accounts of the very large mills, however, are the ones that 
afford the most important information. As a matter of fact, 80 per 
cent of the people in the United States are dependent on mills outside 
their own States for a considerable part of their flour. Evidently, 
therefore, the prices they pay for flour depends largely on the costs 
and the profits of the millers in the great flour-producing centers, 



COSTS, PRICES, AND PROFITS. 57 

whose flour they buy either because they prefer it, or because mills 
in their own locality are not able to produce the quantity of flour 
the community consumes. The surplus flour-producing States are 
found in three relatively small groups, 10 States in all, occupying 
territory designated in Chapter I as the Northwestern Selling Area, 
the Southwestern Selling Area, and the Pacific Selling Area. In 
those States by far the larger part of the output, especially of flour 
shipped out of the State, is produced by a limited number of large 
mills. Furthermore, the competition from the Pacific SeUing Area 
does not aft'ect in any considerable degree the prices paid for flour by 
over nine-tenths of the people of the United States,^* because the 
heavy freight charges across the mountains more than counter- 
balance the advantages afforded these mills by the lower cost of wheat. 

This situation indicates that a relatively small number of mills in 
the hard spring wheat territory of the Northwest and in the hard 
winter wheat territory in the Southwest together with a few concerns 
scattered throughout the mixed farming region stretching from the 
Missouri River to the Atlantic Ocean exert an important influence 
on the price of flour in the whole country east of the Rocky Mountains. 
During the panic of 1917, however, the frenzied demand of the 
consumer for flour at any price was the dominating influence in the 
market. In the very large territory referred to above as the "nuxed 
farming region" there are also limited areas in which, under favorable 
wheat crop concUtions, the price of wheat to local mills, especiaUy if 
its quality is unusually good, enables such concerns to push sales of 
flour at prices wliich materially affect the profits secured by the large 
millers in these localities. 

The scope of the report on costs and profits determined in accord- 
ance with the situation presented above is, therefore, limited to the 
following topics; 

(1) A discussion of the operating results of a smaU group of large 
mills over the five-year period beginning with 1913-14 and ending 
with 1917-18. These mills were selected partly because their 
accounts could be used and partly because most of them are so situ- 
ated that they are usually able to make advantageous use of hard 
wheat. 

(2) A less extended discussion of prices, costs, and profits based 
on the accounts of the principal mills of the Pacific Northwest. 

Section 5. The mills covered. 

Territorial location and kind of wheat used, — Data on in- 
vestment and the returns realized thereon, capable of fairly satis- 
factoiy use, were obtained from the accounting records of 37 com- 

^ Soine business has been done by tbe Pacific coast mills in the cotton States. 



58 COMMERCIAL WHEAT-FLOUR MILLING. 

panies, operating 86 mills,^ located in territory extending from New 
York in the East to Billings, Mont., in the West, and irwoa Duluth, 
Minn., in the North to Nashville, Tenn., in the South. These mills 
are divided into three groups, referred to hereafter as the North- 
western group, the Southwestern group, and the Eastei'n group. 
The 43 mills in the Northwestern group are owned by 12 companies. 
One of these companies also owns mills in the Southwestern group, 
and another operates in all three districts. The 24 mills in the 
Southwestern group are owned by 14 companies and an equal number 
of companies operate the 19 mills in the Eastern group. 

Practically all of the mills belonging to the Northwestern group 
are located in ^linnesota and North Dakota. The mills of the South- 
western group are nearly all located in the neighborhood of Kansas 
City or in the State of Kansas. A few mills in Missouri and in Okla- 
homa are in'^luded in this group because of the similarity of operat- 
ing conditions. The Eastern group embraces mills located as far 
apart as Chicago and New York Gty, east and west, and Grand 
Rapids, Mich., and Nashville, Tenn., north and south. 

The decisive consideration in the selection of these companies 
was the possibility of using their records in the compilation of in- 
formation which could be accepted as reliable in a degree that would 
warrant comparisons between the results obtained by the different 
groups from year to year. Even this very moderate requirement 
made it necessary to reject the material collected from a considerable 
number of mills. It has, however, made it practicable to include 
some companies whose records were in certain respects unsatisfactorj''. 

The mills included in the Northwestern group grind only a negli- 
gible proportion of soft wheat. Though it was impossible to obtain 
exact information on the subject, it appears probable that the pro- 
portion of soft wheat ground by the Southwestern group varies m 
different years from 10 to 20 per cent of all wheat ground, according 
to more or less favorable conditions for the use of soft wheat. The 
conditions referred to depend not only on the proportion of hard and 
soft wheat in the local supply but also on the relative excellence of 
the two kinds of \^'heat m the crop for any given year. The few mills 
in this group which grind considerable quantities of soft \^ heat have 
be(Jn included with the hard wheat mills because their prices, costs, 
and profits were not sufficiently at variance from those of the hard 
wheat mills to affect materially the average results shoNVTi for the 
group. It was desirable morever to make use of all available accounts 
representing the results obtained by commercial mills operating in 
that section of the country. These soft wheat mills were not put 
into a class by themselves because the results sho\\Ti by their records 
could not be accepted as typical for any larger selected group of soft 
wheat mills and because comparisons of results shown for these mills 

^ One mill, operated independently until 1918, is considered as belonging to its present owners through- 
out the five years. 



COSTS, PRICES, AND PROFITS. 



59 



themselves, from year to year, would not be satisfactory. It is 
believed, however, that in putting the hard and soft wheat mills in 
one group any error in the accounts that has not been eliminated 
will not appreciably affect the a'rerages for the entire group. 

The information in regard to the proportion of hard and soft 
wheat used by the mills composmg the Eastern group is still more 
indefinite than for the other two groups. It is not improbable that 
in some years more soft than hard wheat is used. But hard wheat 
is always used to a very large extent by mills located in the northwest- 
ern part of this section and those located on the natural route from 
the hard wheat regions of the West to the seaboard. On the other 
hand, mills located in the southern part of the territory occupied by 
this group use soft wheat almost exclusively and those scattered 
throughout the territory between use hard and soft wheat in pro- 
portions dictated by the conditions of supply. Exhibit V shows 
the proportion of hard and soft wheat used by certain mills grouped 
territorially. The mills from which this information was received 
are not all mcluded in the group of 37 whose accounts were used 
in preparmg that part of this report dealing with costs and profits. 

Consumption of wheat and output of flour. — Information in 
Exhibit III indicates that mills located in the hard wheat States 
were increasmg their output faster than mills in the other States 
during the years 1899 to 1919, inclusive. Furthermore, Table 13 
shows that the large commercial mills were domg a considerably 
greater proportion of the wheat-flour business of the country at the 
begmning of the war than 10 years before. The information in the 
following table in regard to production and sales of the 37 companies 
whose operations are to be discussed was compiled from the records 
of the companies. It indicates that since 1914 this process of locali- 
zation and concentration has been more or less interrupted. For that 
reason this table is presented for consideration before proceeding to 
the discussion of the investment of these mills and the return realized 
thereon. 

Table 16. — Wheat consumption, flour and feed production, and flour and feed sales of the 
37 selected companies, mill years 1913-14 to 1917-18. 



1913-14 


1914-15 


1915-16 


1916-17 


1917-18 


168,062 


170,311 


198,892 


165,568 


150,464 


119,471 
21,170 
27,421 


112,127 
26, 173 
32,011 


139,782 
28,010 
31,100 


114,063 
27,750 
23, 755 


101,074 
24,313 
25,077 


37, 985 


37,699 


43,761 


35,991 


33,901 


27,167 
4,695 
6,123 


24,806 
5,801 
7,092 


30,848 
6,098 
6,815 


24,608 
6,130 
5,253 


22,960 
6,346 
5,595 



Wheat used (1,000 bushels) . 



Northwestern group . 
Southwestern group. 
Eastern group 



Flour produced (1,000 barrels)* 



Northwestern group . 
Southwestern group. 
Eastern group 



> In addition to this the production of rye, com, barley, and rice products in 1917-18 was as follows: 

Barrels. 

Northwestern group 4, 685, 683 

Southwestern group 302, 256 

Eastern group 638, 480 

Total 5,526,419 



60 



COMMEllCIAL WHEAT-FLOUR MILLING. 



Table 16. — Wheat consumption, flour and feed production, and flour and feed sales of the 
37 selected companies, mill years 1913-14 to 1917-18 — Continued. 



1913-14 



1914-15 



1915-16 



1917-18 



Feed produced (1,000 tons) 

Northwestern group . . . 
Southwestern group . . . 
Kastern group 

Flour sales (1 ,000 barrels). . 

Northwestern group . . . 
Southwestern group . . . 
Eastern group 

Feed sales (1,000 tons) 

Northwestern group . . . 
Southwestern group . . . 
Eastern group 



1,358 



1,398 



1,673 



1,496 



1,227 



955 
180 
223 



911 

223 
264 



1,173 
240 
260 



1,055 
243 
198 



822 
205 
200 



38, 450 



38,231 



43,430 



36, 777 



34, 659 



27,272 
5,003 
6,175 



25, 090 

5,878 
7,263 



30,364 
6,137 
6,929 



25, 145 
6,202 
5,430 



23,114 
5,712 
5,833 



1,364 



1,405 



1,672 



1,501 



1,243 



954 
183 
227 



915 
224 
266 



1,170 
240 
262 



1,057 
243 
201 



834 
206 
203 



The degree of progress in localization and concentration in the 
flour industry within any given period can not be exactly established 
because there is no precise information in regard to the quantity of 
wheat ground and flour produced in the country. The consumption 
of wheat in flour mills was apparently about 4 million bushels less 
and the output of flour about 1 million barrels less in 1917-18 than 
in 1913-14. (See pp. 91-97.) 

Comparing the figures in Table 16 with those in the preceding 
paragraph, it seems clear that mills represented by the South- 
western group continued to increase their share in the coimtry's 
wheat-flour business from 1913-14 to 1917-18. For while, according 
to estimate, all miUs ground 4 miUion bushels less wheat and 
made 1 million barrels less flour in the last year of the five than in 
the first, the Southwestern group ground 3 million bushels more 
wheat, and had increased its output of flour accordingly. Fm*ther- 
more, this group did not lose business in 1916-17 as the other two 
groups did. In fact, its output both of flour and feed increased 
slightly in spite of a decrease of a quarter of a million bushels in the 
quantity of wheat ground. This peculiar result is in part explained 
by the difference in the moisture content of the two crops. Tests 
made by the Federal Grain Supervision Section of the Bureau of 
Markets show a moisture content of 13.9 per cent for samples of hard 
red winter wheat arriving in Kansas City from the crop of 1915 and 
of only 11.6 per cent for samples taken from the crop of 1916 (also 
see Exhibit VI). 

When the other groups are considered, the results are strikingly 
different. Consumption of wheat by the Eastern group feU off 
about 2^ million bushels; by the Northwestern group about 18^ 
millions. But the data just referred to indicate that consumption 
for the entire country decreased only 4 million bushels. It follows 
that since wheat used by the 37 companies fell off 18 miUion bushels, 



COSTS, PRICES, AND PROFITS. 61 

according to Table 16, smaller mills not included in the 37 must 
have increased their consumption of wheat about 14 million bushels. 
These figures might be accepted as indicating a considerable de- 
crease in relative importance of the Northwestern and Eastern 
groups. This indication seems much stronger, however, for the 
former than for the latter. 

The figures for 1917-18, however, do not establish a declining 
tendency in the business of the Northwestern group any more than 
the figures for 1915-16 establish the opposite. Estimates referred to 
before (see Table 29) show an increase in wheat consumption by all 
mills in 1915-16 over the previous year of about 8 per cent, but 
Table 16 shows that wheat consumption by the Northwestern group 
increased about 25 per cent that year. As has been seen in the 
preceding paragraph, however, this apparent tendency of the North- 
western group to increase its proportion of the total flour business 
was entirely reversed within two years. Its remarkable gain in 
1915-16 was undoubtedly due to the fact that 1915 was a year in 
which the hard spring wheat harvest was most satisfactory in quaUty 
as well as quantity. On the other hand, winter wheat of the 1915 
crop was quite generally inferior in quality and light in weight. 
(See Exhibit VI.) 

Attention should be called to the probable effect of Government 
appeals for greater production on the output of the smaller mills 
in 1917-18. Account should also be taken of the fact that the 
quantity of wheat ground by the large mills could not exceed the 
limit fixed by Food Administration restrictions. Furthermore, it is 
said that it was partly in response to appeals from the Food Ad- 
ministration that the Northwestern group produced the 4^ million 
barrels of wheat-flour substitutes shown in Table 16. In preceding 
years their production of these substitutes had been negligible, or of 
such small significance that it has been included in the wheat-flour 
figures in the tabulations of the Commission. It is evident that the 
conversion of wheat-flour machinery to the grinding of these sub- 
stitutes must have had some part in the decreased production of 
flour by these mills in 1917-18. Special Government restrictions on 
the movement and consumption of wheat were also probably con- 
tributing factors. In February, 1918, the Minneapolis office of the 
Milling Division issued an order that all miUs which had ground 
75 per cent of 90 per cent of their average yearly grind were to dis- 
continue operations inmiediately. Mills that were grinding for the 
Army and Navy and those that were grinding local wagon wheat for 
the domestic trade were excepted from this order. It is probable 
that this regulation tended to somewhat increase the relative output 
of the smaller mills. 



62 



COMMERCIAL WHEAT-FLOUR MILLING. 



Table 16 shows that for the five years taken together sales of flour 
exceeded the flour produced. These mills have a reported capacity 
of about 65 million barrels annuaUy, and have never produced 45 
million barrels, yet they are buying more or less flour every year. In 
no year of the five, however, did such purchases amount to 1^ per 
cent of the sales of the 37 companies. While no special investigation 
was made of this practice, it is apparently in large part the result of 
temporary shutdowns of different plants, or of occasional increased 
demand on the part of customers. For example, much of the large 
quantity purchased in 1913-14 was due to the burning of a mill. It 
might be noted, however, that the other years in which sales ex- 
ceeded production were all high wheat cost years. This suggests 
the possibility that in such years cost of production may have been 
less for local miUs favorably situated as to wheat supply than for the 
large miUs. 

Section 6. Investment, earnings, and distribution of earnings. 

The investment as revised by the Commission was computed by 
adding to the amount of common and preferred stock outstanding, 
outstanding bond 5, accumulated undivided profits and the estimated 
value of plants rented by the 37 companies. The following table 
shows changes made by the Commission in the investment as found 
in the original accounts at the beginning and at the end of the five- 
year period. These changes include deductions under the items, 
"Goodwill," "Outside investments," and "Depreciation"; additions 
under the items, "Federal tax reserves," "Other reserves," and 
"Estimated value of rented plants"; and miscellaneous changes in 
inventories and other accounts. 

Table 17. — Deductions from and additions to the investment as shown in the original 

company accounts. 



First of year 
1913-14. 



End of year 
1917-18. 



Investment shown by company accounts 

Deductions from investment originally shown: 

Good will, etc. . . , 

Outside Investments 

Depreciation (increases in) 

Inventory adjustments, etc. (net) 



Total deductions. 



Additions to Investment originally shown: 

Fe leral tax reserves ' 

Other reserves ' 

Estimated value of rente t plants 

Inventory adjustments, etc. (net) 



Total additions 

Investment as revised by the Commission. 



$46,996,419.60 



4, 94=!, 206. 23 

2,467,925.14 

683, 662. 39 



8,099,793.76 



551,512.57 

3,854,096.00 
155, 545. 32 



4,561,153. 



43, 460, 779. 73 



3,701,389.46 



4,661,475.00 

6,318,167.35 

5,123,707.76 

814,024.63 



16,917,374.75 



6,744,665.71 
4,805,525.53 
5,194,419.00 



16,744,610.24 



69,528,604.95 



1 Considered as appropriated swplas. 



COSTS, PRICES, AND PROFITS. 63 

The table shows practically $5,000,000 deducted under the head of 
good will, trade-marks, and other intangible assets. The leading 
millers of the country do not set up intangible assets in their accounts. 
The good will shown above was found in the accounts of four mills, 
three of minor importance. Nearly three-fourths of the whole 
amount was found in the accounts of the other mill which made no 
pretense that it represented actual investment. The securities 
issued in exchange for it are labeled to that effect. This deduction 
on account of good will was made because the purpose is to establish 
the investment necessary for the production and distribution of flour. 

The purpose of d3ducting outside investments, the value of which 
increased from 2h to 6^ million dollars during the five years, is 
evident. The inquiry is concerned only with the milling business 
and, consequently, an investment that is partly milling and partly 
something else can not be used satisfactorily. It is worth noting 
that the increase of about $3,850,000 was in large part invested in 
United States bonds. 

The failure by the millers to establish reasonable depreciation 
reserves has already been noted. Such information as was available 
in regard to the plant and equipment of the 37 companies warranted 
an increase in depreciation reserves of considerably over $500,000 
at the beginning of the period. A more complete investigation might 
have justified a still larger increase. During the five years the Com- 
mission's changes increased the total depreciation reserves set up by 
the companies practically $4,500,000, resulting in a deduction of 
$5,123,707.76 from the investment shown by the millers' own accounts 
at the end of the period. 

The prevalent practice among the large mills of throwing profits 
and losses from one year to another by setting up estimated loss or 
gain on unfilled orders and open trades in their profit and loss accounts, 
and taking inventories at market value instead of average cost, has 
already been referred to. (See p. 55.) These incorrect statements 
of results obtained from actual receipts and expenditures within a 
given year have been corrected so far as possible. The changes in 
the accounts made necessary by this practice, shown in the table as 
"inventory adjustments," resulted in an addition of $155,545.32 to 
the investment at the beginning of the five-year period and a sub- 
traction of $814,024.63 at its close. 

Altogether the Commission's deductions from the investment 
shown by the mill accounts at the first of the year 1913-14 amounted 
to over 8 million dollars and to 17 million dollars at the end of 1917-18. 
Additions to the company investment at the end of the period, 
however, practically balanced deductions, so that total investment, 
including good will as shown in the original accounts, is only $175,000 



64 COMMERCIAL WHEAT-FLOUR MILLING. 

more than the milling investment of the 37 companies as determined 
by the Commission. 

The additions to investment include the capitahzed value of rented 
mills, reserves which, set aside for provisional or contingent expendi- 
tures, still continue to be a part of surplus until the expenditures are 
actually made ^^ and certain adjustments in inventories. Their 
rented mills are unquestionably as essential to the production of the 
flour sold by these companies as are their own mills, and the value of 
such mills necessarily constitutes a part of the capital employed in 
the business. 

The increase in the amount of reserves disallowed by the Com- 
mission from half a million dollars at the beginning of the period to 
11^ million dollars at its close is a more complex matter. Here again, 
as in the case of good will, the Commission has no controversy with 
the conservative business man in regard to the wisdom of establishing 
reasonable surplus reserves against future contingent expenditures, 
losses through a declining market, or through any unlooked-for 
change in factors affecting the financial outcome of his business. 
For example, the accumulation of funds for the payment of cumula- 
tive dividends on preferred stock is certainly a prudent if not at times 
a necessary operation, but these funds remain in the business and 
should be continued in the accounts as a part of the surplus until 
payment of the dividends actually occurs. Consequently the Com- 
mission has thrown reserves of this character back into surplus as 
accumulated profits. Other reserves treated in the same way are 
those for contingent losses that may never occur, and for prospective 
enterprises that may never be undertaken. The reserves of this 
character thrown back into surplus amounted to $554,512.57 at the 
beginning of the period and to $4,805,525.53 at its end. In other 
words, while the Commission set up about $4,500,000 in reserves to 
provide adequately against depreciation in plant and equipment, it 
also threw back into surplus a slightly larger amount in reserves that 
could not be justified. It will be seen from the exact figures that the 
net effect of the Commission's revision of these items was a decrease 
of about $300,000 in the investment shown at the end of 1917-18 in 
the original accounts. 

In addition to the items discussed in the paragraph above, many 
of the companies have in recent years set up reserves for the payment 
of Federal taxes. These reserves may not have exceeded the amount 
of taxes that were paid to the Federal Government during the fol- 
lowing year; nevertheless, if these deductions from investment had 
been allowed to stand, the Commission's revised investment would 

'^ Reserves not returned to surplus for addition to investment were depreciation, bad debts, and others 
intended to offset an actual decrease in assets. 



COSTS, PRICES, AISJ-D PROFITS. 



65 



not have covered millions of earnings which were actually retained 
by the mills and used in their business. 

The following table shows for the 37 companies, and also for the 
three groups, the revised investment at the beginning of each year, 
1913-14 to 1917-18; changes in this investment due to operations 
outside the milling business during each year; and the net increase 
in the investment due to mill earnings less distributions and other 
justifiable charges against such earnings: 

Table 18. — Revised investment in the milling business at the beginning and end of each 
year, together unth adjustments because of transactions not pertaining to the milling 
business, and additions through the mill earnings of the year, less distributions, by years, 
1913-U to 1917-18. 

[Figures in italics are to be deducted.] 



37 COMPANIES. 

Investment, beginning of year. . . 

Surplus adjustments i 

New investment '^ 

Mill earnings 

Distributions from mill parninss' 
Mill earnings ret.jined in busi- 
ness 

Investment, end of year 



NORTHWESTERN GROUP. 

Investment, beginning of year.., 

Surplus adjustments i , 

New invesinient '- , 

Mill earnings , 

Distributions from mill earn- 
ings 8 , 

Mill earnings retained in lousi- 
ness 

Investment, end of year 



SOTTTHWTSTERN GROUP. 

Investment, beginning of year.. 

Surplus ailjustni^nts '' 

Nev investment 2 

Mill earnings 

Distributions from mill earn- 
ings » 

Mill earnings retained in busi- 
ness 

Investment, end of year 



easit!:rn group. 

Investment, beginning of year. . . 

Surplus adjustments! 

New investment 2 

Mill eaminss 

Distributions from mill earn- 
ings » 

Mill earnings retained in busi 
ness 

Investment, enil of j'ear 



1913-14 



S43,460,779.73 

34(1,992.44 

&99,m.08 

5,512,163.40 

.5, ws, m. 09 

403.60.5.31 
43,915,042.50 



26,708,042.44 

332, 280. 94 

51,708.49 

.3,679,019.16 

4, 136,043. OJi 
26,635,007.99 



6,178,579.31 

16,9.58.60 
62, 7S.1. J, 
709,089.80 

S97,477.n 

311,612.58 
6,408,499.82 



10, 574, 1,57. 
3C, 670. 10 
2S8,400.00 
1,124,054.44 

674,947. S3 

549, 106. 61 
10, 871, 534. 69 



■43,91.5,042.50 

l.'td,602.59 

20*), 112. 81 

7,974,986.14 

4, m, 986. 38 

3,767,099.76 
47,746,462.48 



26,635,007.99 

S00,847. " 

141,. 581. 75 

5,401,004.41 



1915-16 



547,746, 

485, 

62'J, 

6,338, 

5, 193, 

1,144, 
48, 750, 



462. 48 
8.33. 13 

303. 50 
651. 23 
168.09 

89.3.11 
825. 25 



$48,750, 

o2'), 

632, 

20,517, 

7,gde, 

13,261, 
62,0.15, 



29,051,545.39 

475, 798. 80 

262,GH.-i.62 

4 647,172.56 



S, 925, SO4. BG S,9S2, -593. 7? 

2, '•75, 799. 851 724,578.84 
29,051,545.39 29,9.89,239.41 



6,408.499.82 

25,211.62 

1,53,428.06 

1, 455, 141. 41 

641,955.2b 

913, 186. 15 
7,500,325 65 



10,871,534. 
29,942.99 
85,900.00 
1, 118, 840. 32 

739,826.50 

379,013.76 
11,194,591.44 



7,500,325.65 

40,787.61 

102,15.5.12 

977, 248. 29 

506,238.89 

471,009.40 
8,114,277.78 



11,194,591.44 

30, 753. 28 
46h,8S5.00 
714,2.30.33 

764,925. 4S 

60,695.10 
10,647,308.06 



825. 25 
994- 46 
900. 91 
569. 45 
211.45 

358. 00 
089. 70 



29,989,239.41 
480,518.43 
433,075.90 

15,212,647.98 

6,797,558.56 

9,415,089.42 
,19,356,886.30 



8,114,277.78 

10,581.03 

139,825.01 

2,987,187.21 

757, 150. 28 

2,2.30,036.93 
10,473,558.69 



10,647,308.06 

38,895.00 

40,000.00 

2,317,734.26 

701,502.61 

1,016,231.65 
12,184,644.71 



1917-18 



015,089.70 

838,932.11 
391,307.06 
,440,858.36 
479,718.06 

901,140.30 
.528,604.95 



30,3.50,883.30 

< 1,379, to 'f. 29 

290, 1,50. 45 

13.518,744.14 

8,501,572.02 

5,017,172.12 
43,285,404.58 



10,473,558.69 

* 472, 707. 42 

287, 856. 61 

5,019,603.13 

2,192,946.59 

2,626,656.54 
13,115,464.42 



184,644.71 
987,220.40 
187,000.00 
902,511.09 



1,785,199.45 

2,117,311.64 
13,127,735.95 



1 The net amoimr of charges and credits in the original accounts, arising from transactions that can not 
justiHably be considered as belonging to the raillins: business of tiie j'ear. 

2 Net change through the sale and redemption of cornoracion securities, and the contributions and with- 
drawals of individual proprietors. The contributions' an 1 withdrawals were insignifieant in amount. 

' These distriiiutions include dividends, boad interest. Federal taxes, and rents. The amount sbowTiin 
the table is a net figure obtained by deducting from the total of such du^tributions all income from outside 
sources. 

* The increase shown is largely the result of the puixhase of Government bonds. 

183250°— 20 5 



66 COMMERCIAL WHEAT-FLOUR MILLING. 

Table 18 shows only the investment in the milling business of these 
concerns. This includes, of course, their investments in subsidiary 
enterprises, such as grain elevators operated primarily for the purpose 
of securing a reliable steady supply of a desired quality of wheat at 
the lowest possible cost, and branch houses maintained at a distance 
from the mill for the purpose of securing as satisfactory and as profit- 
able a distribution of the mill products as is possible. 

On the other hand, it does not include as milling investment a 
small part of the surplus of these concerns, which has been invested in 
the securities of other enterprises, Liberty bonds, etc. The amounts 
thu§ invested have been considered as incidentally held subject to 
conversion into cash and distribution in dividends at the pleasure 
of each concern, and, therefore, not really a part of the investment 
in the milling business itself. 

Starting with $43,460,779.73 at the beginning of 1913-14, the 
37 companies increased their investment to $69,528,604.95 at the 
end of 1917-18. In spite of this increase in investment, their sales 
had fallen off from 38,450,000 barrels of flour in the first year to 
34,659,000 barrels in the last. As already noted, however, their 
production of rye, corn, and other cereal products had increased as 
much as their production of wheat flour had fallen off. (See p. 59.) 

The net addition to their investment through sale and redemption 
of their own securities during the five years was only $200,000.^* 
During the first three years, while as yet the war had apparently 
had but slight effect on the situation, they were able to increase 
investment out of earnings by $5,000,000 and at the same time make 
a net reduction of over $700,000 in their outstanding securities. 
During the two critical years of the war which followed, they re- 
tained in the business over $23,000,000 of earnings. In addition 
investment was increased by the sale of their own securities in excess 
of retirement to the amount of $900,000. This, however, was not 
for use in their milling business, for not only the $900,000 secured 
by selling their own securities but also some 2h million dollars taken 
out of earnings were invested in Government bonds. This increase 
in their holdings of Federal securities was largely responsible for the 
deduction of $2,838,932.11 from investment in order to get the true 
milling investment at the end of the year 1917-18. 

The mill earnings beginning with 5 J million dollars for the first 
year increased to over $22,000,000 (four times as much) in 1917-18. 
(See note p. 9.) According to the United States Census Bureau 
1913-14 was not a good year in the milling business, but these mills, 
even in that year, earned over 12 per cent on their average invest- 
ment. The $7,974,986.14 earned in 1914-15 was more than 15 per 

'6 This does not, of course, include S3, 900, 000 transferred from surplus to capital stock through the 
distribution of stock in dividends, which added nothing to total investment. 



COSTS, PRICES, AND PROFITS. 



67 



cent on investment, but the abundant supply of flour in 1915-16 
showed its natural consequence in the decreased earnings of that 
year, which were practically at the same rate as in 1913-14. To 
make clear the principal cause of the decreased earnings in 1915--16 
it is only necessary to say that flour that sold for more than %7 in 
February, 1915, sold for less than So in four out of the twelve months 
of 1915-16." 

The mills went into the year 1916-17 with good supplies of low- 
cost goods in their inventories. As early as August, 1916, the known 
great deciease in the sup])ly of wheat had caused the wholesale prices 
of flour to advance 40 to 50 per cent above the level in June, 1915." 
This advance in prices did not halt appreciably, except for a short 
time near the close of the year 1916, when peace rumors were preva- 
lent, until in May, 1917, when the prevailing price was from 190 to 
200 per cent above that in the preceding June. Prices of wheat 
moved parallel to those of flour, but the holdover from the big crop 
of 1915 and other favorable circumstances enabled the 37 companies 
to make large increases in the margin between wheat cost and flour 
receipts per barrel. 

The result of the milling situation briefly suggested in the preceding 
paragraph was a threefold increase in the profits realized in 1916-17 
over those of the preceding year. Indeed the rate of return on invest- 
ment was three times what it had been for the two years 1913-14 
and 1915-16, in spite of the larger investment required by advancing 
prices and a consideijable decrease in the volume of business. 

Government intervention became imperative in 1917. Prices of 
wheat were stabilized and the profits of millers were to some extent 
standardized. Mills frequently made more than the standardized 
profits, however, in order to insure themselves against possible losses 
toward the end of the year. There was practically no limit to the 
profit on flour except the Government restrictions since substitutes 
such as corn meal and rye and barley flours were being forced upon 
the consumers, and the prices paid had little influence with pur- 
chasers if they could find anyone who would sell them wheat flour. 
Furthermore, \he profit of $22,000,000 shown for 1917-18 does not 
fully represent the wider margin actually paid by the consumers 
who purchased flour in the commercial flour markets of the United 
States that year. It became plainly evident toward the close of 
the year that no reversal in general market conditions was possible. 
Consequently, shortly before the close of the period during which the 
standardized profit was in force, some of the mills, realizing that their 
average profits would otherwise exceed greatly the standard agreed 
upon, made sales direct to the Government at less than cost. Cir- 
cumstances have not permitted the Conmiission to investigate the 
full effect of this policy. 

3' The Northwestern Miller, Oct. 1, 1919, p. 58. 



68 



COMMERCIAL WHEAT-FLOUR MILLING. 



It will be noted that the net increase in milling investment during 
the five years shown in Table IS (see also Table 19, ]> 69) was less 
than the amount shown under the item "Mill earnings retained in 
in the business." This is due to the fact that part of these earnings 
were used in the purchase of stock in outside enterprises, Government 
bonds, etc., the remainder representing the net addition to the invest- 
ment as it stood at the beginning of the year 1913-14. 

The revised investment at the beginning of 1913-14 and at the 
end of 1917-18 is shown below, together with the per cent of increase 
during the period: 



1913-14 



37 companies 

Northwestern group 
Southwestern group 
Eastern group 



$43,4fiO,7SO 

26,708,0-12 

6,178.579 

10,574,158 



1917-18 



$69,528,605 
43,285,405 
13,115,464 
13,127,736 



Increase. 



Per cent. 
60 
62 
112 
24 



These increases absorbed less than half of the mill earnings shown 
below, except in the case. of the Southwestern group: 



37 companies 

Northwestern group 
Southwestern group 
Eastern group 



Amount of 

earnings. 



S62,784,228.58 
42,458,588.25 
11,148,269.84 
9,177,370.49 



Per cent 
on origi- 
nal in- 
vestment. 



144 
159 
180 
87 



Average 
annual 
rate on 
invest- 
ment.! 



Per cent. 
22.5 
24.4 
23.5 
15.8 



1 Mean between the investment at the beginning and end of the period. Rates computed as explained 
under Table 20 on page 72. 

Payments out of these earnings to stockholders, bondholders, 
rented-mill owners, and on account to Federal taxes are shown below: 



37 companies 

Northwestern group . 
Southwestern group . 
Eastern group 



Amount of 
distributions. 



2 834,245,142.07 
25,282,971.90 
4, 395, 768. 24 
4,566,401.93 



Per cent 

on 
original 
invest- 
ment. 



Average 
amiual 
rate on 
invest- 
ment.! 



Per cent. 
12.1 
14.4 
9.1 

7.7 



I Mean between the investment at the beginning and end of the period. 

s Payments of Federal taxes included in these distributions amounted to $5,524,883.77. 

In addition to these distributions nearly $4,000,000 of miU earn- 
ings were transferred to outside investments. 

To get the fuU significance of the above tables, assume that a man 
had a million-dollar investment covering all forms of capital included 



COSTS, PRICES, AND PROFITS. 



69 



in the $43,460,780 investment of the 37 companies at the beginning 
of 1913-14, and a corresponding investment in the mills of the dif- 
ferent groups. The table below shows the results that would have 
been realized on such investments during the five-year period: 



Original 
investment. 



Earnings in 
five years. 



Withdrawn 
during 

five 
years. 1 



Milling 

investment 

at end of 

period. 



37 companies 

Northwestern proup. 
South v,-est(.rn group. 
Eastern group 



$1,000,000 
1,000,000 
1,000,000 
1,0(30,000 



$1,440,000 

1,590,000 

1, 800, 000 

870,000 



$840,000 
970, 000 
680, 000 
630,000 



$1,600,000 
1,620,000 
2, 120, 000 
1,240,000 



1 This includes a proportionate part of Federal tax payments and additions to outside investments. 

For the purpose of more effective comparison the financial results 
obtained by the 37 companies during the five-year period are sum- 
marized below according to the original accounts and also according 
to the accounts as revised by the Commission: 

Table 19. — Comparison of the results of mill operation and of investment items as shown 
in the original accounts and in the Commission's revised statements. 

[Figures in italics arc to be deducted.] 

Financial results shown by original accounts: 

Investment,! beginning of 1913-14 $46,996,419.60 

Net increase in securities outstanding 3, 793, 382. 30 

Outside income , 1, 720, 492. 88 

Milling income 47, 876, 696. 98 

. Total income 53, 390, 572. 16 

Dividends paid SO, 685, 622. SO 

Net increase in investment 22, 704, 949. 86 

Investment,! gj^^j ^f ]9i7_i8 69,701,369.46 

Financial results shown by revised accounts: 

Investment,! beginning of 1913-14 43, 460. 779. 73 

Adjustments 2, 678, 79S. 59 

New investment 207, 532. 30 

Mill earnings 62, 784, 228. 58 

Distribution from mill earnings 34, 245, 142 07 

Mill earnings retained in business 28, 539, 0.«6. 51 

Investment,! end of 1917-18 69,528,001.95 

These tables are not easily comparable, as the purpose of the fii'st 
is to show results for the entire business of the companies, and that of 
the second is to show results for their miUing business only. For 
this reason the amount of outside income is shown in the upper part 
of the table and not in the lower. Furthermore, in the lower part of 
the table, in addition to excluding investment in outside securities 
from the revised investment, the Commission has included the esti- 
mated value of rented plants. (See p. 64.) 

The difference between the item of "Net increase in securities 
outstanding" in the upper part of the table and the item "New in- 
vestment" in the lower part is largely due to the exclusion of stock 
dividends from new investments. They constituted an addition to 



> Includes stocks, bonds, and surplus. 



70 COMMERCIAL WHEAT-FLOUR MILLING. 

stock outstanding and a corresponding deduction from surplus but 
added nothing to investment. The Conmiission includes in its new 
investments a i?30,000 estimated increase in the value of rented plants 
during the live years, which was due to changes in the buildings 
themselves and not to reappraisals. 

Receipts and expenditures not really a part of the milling busi- 
ness, which resulted in a net charge against income of about .'$2,700,000, 
are brought together under the item "Adjustments" in the lower part 
of the table. These adjustments include deductions from the in- 
vestment as it stood (after revision) at the beginning of the period 
as follows: (1) About S3, 850, 000 paid out for outside investments 
(see p. 66); (2) about $150,000 in miscellaneous items which the 
Commission rejected as unwarranted charges against milling opera- 
tions, and, tlierefore, deducted fi'om investment just as regular 
dividends are deducted; and (3) about $200,000 added directly to 
investment in the original accounts by means of appraisals which 
were rejected by the Commission. 

The adjustments also include direct additions to investment by 
the Commission, because of reserves taken out of investment as 
shown on the books, for a variety of contingencies such as those 
enumerated on page 64, amounting to about SI ,500,000. Apparently 
these reserves had been set up without corresponding charges to 
operations, or to income, and since this prevented throwing them 
back into earnings, it was necessary to return them directly to in- 
vestment. With complete records and an exhaustive investigation 
practically all of this $1,500,000 might have been shown to be a 
part of earnings, but the general results obtained from the inquiry 
would not be materially changed. 

In the upper part of the table the original accounts show that the 
mill earnings of the 37 companies during the five years amounted 
to $47,876,696.98. In sharp contrast with this the lower part of 
the table shows mill earnings amounting to $62,784,228.58. On 
examination, however, this increase of $14,907,531.50, or over 30 
per cent, is found to involve differences as to classification to a 
greater extent than questions as to the actual facts in the case. 

In obtaining the statement of mill earnings found in the upper part 
of the table, $11,774,659.10 was deducted as a provision for Federal 
income and excess-profit taxes. 

The directors of the 37 companies, whose accounts were used in the 
preparation of this table, did not look upon bondholders or owners 
of rented plants as investors in wheat-flour milling. As a natural 
consequence they added bond interest and, naturally, rent paid, to 
their other expenses. But, since in this report bonds outstanding 
and the estimated value of rented plants have been inchided in the 
investment accounts of the 37 companies, payments of bond interest 



COSTS, PRICES, AND PROFITS. 71 

and rent necessarily Ijeoome a part of the net income ti«ed in deter- 
mining the rate of return on investment. The rents thus added to 
not income amounted to $3,589,089.31, and the bond interest to 
$1,416,114.36. 

These three items — Federal taxes, rentals, and bond interest — 
amounted to $16,779,862.77 during the period covered by this table. 
Since the net difference between mill earnings in the two tables was 
only $14,900,000, it is evident that the other changes made by the 
Commission reduced the earnings shown by the companies' own 
accounts by about $1,900,000. 

The more important changes made by the Commission that tended 
to reduce mill earnings were as follows: 

Increase in depreciation $3, 235, 778. 38 

Disallowing estimated profit on unfilled orders, etc - 228, IS-"). 10 

Reducing inventories taken at market price 741, 414. 85 

Disallowing increases of investment by reappraisals 1, 023, 984. 79 

5, 225, 333. 12 

On the other hand, the Commission threw back into earnings con- 
tingent reserves discussed on page 64 to the amount of $3,249,673.14 
and disallowed small miscellaneous charges amounting to $113,330.31. 
The total of these two credit items, namely, $3,363 003.95, sub- 
tracted from the $5,200,000 in debit items listed above, approximate 
the $1,900,000 reduction in earnings referred to in the preceding 
paragraph. 

While the upper part of the table on page 69 gives the amount of 
dividends paid by the 37 companies as $30,685,600, the lower part 
of the table shows a distribution of mill earnings amounting to 
$34,245,142.07. Stock dividends amounting to $3,900,000 included 
in the $30,685,600 were excluded from the Commission's distribution 
figures, because the earnings were not actually distributed but were 
retained in the business. It was assumed further that the $1,700,000 
income from outside investment was all distributed to the stock- 
holders as a part of dividends paid, with the consequence that that 
amount was necessarily deducted from actual cash distributions in 
order to obtain the distribution from mill earnings. On the other 
hand, as already noted, the $5,500,000 paid out as Federal taxes was 
included in distributions from net income. Bond interest amounting 
to $1,400,000 and rent amounting to $2,300,000 were treated in the 
same way. These three items added $9,200,000 to disti-ibution 
while the deductions noted above amounted to $5,600,000, giving a 
net difference of $3,600,000 between dividends as shown in the 
original accounts and distributions from mill earnings according to 
the revised figures. 

That the original accounts should show only $22,704,949.86 added 
to total investment, while the Commission's revisions show that 



72 



COMMERCIAL WHEAT-FLOUR MILLING. 



$28,539,086.51 of mill earnings were retained in the milling business 
is the net result of the foregoing changes in the operating and 
investment accounts. 

Table 18 shows new investments during the five years for the 
Northwestern and also for the Southwestern group. In neither case, 
however, was the amount of these new investments nearly so large 
as the amount of money put into outside enterprises. In the case 
of the Eastern group, redemption of company secmities exceeded 
their sale in every year of the five. 

Comparison between the earnings of the different groups shows 
that the earnings of the Northwestern group varied from about twice 
to about three times those of the other two groups combined, except 
in 1917-18 when the amount was only one and one-haK times the 
aggregate for the other groups. 

Section 7. Rate of return on investment. 

The following table shows the average investment and the rate of 
return realized on it for the 37 companies and each of the groups by 
years from 1913-14 to 1917-18: 

Table 20. — Investment and rate of return on investment, by groups and by years, 1913-14 

to 1917-18. 





37 companies. 


Northwestern group. 


Southwestern group. 


Eastern group. 


Year. 


Investment. 


Per 

cent of 
profit. 


Investment. 


Per 
cent of 
profit. 


Investment. 


Per 

cent of 
profit. 


Investment. 


Per 
cent of 
profit. 


1913-14 

1914-15 

1915-16 

1916-17 

1917-18 


$43, 687, 911. 12 
45,830,752.49 
48, 248, 643. 87 
55, 382, 957. 48 
65,771,847.33 


12.6 
17.2 
13.1 
38.4 
34.1 


$26,671,525.22 
27,843,276.69 
29,520,392.40 
34,673,062.86 
41,321,145.44 


13.8 
19.4 
15.7 
44.7 
32.7 


$5, 293, 539. 56 
6,954,412.73 
7,807,301.72 
9,293,918.23 

11,794,511.56 


11.3 $10,722,846.34 
20.9 1 11,033,063.07 

12.5 10,920,949.75 
34.2 11,415,976.39 

42.6 12,656,190.33 


10.5 
9.1 

6.5 
22.8 
30.8 



The average investment shown in Table 20 is the mean between 
the investment at the beginning and at the end of the year. The 
method of determining these investments has been discussed in the 
preceding section. 

The amounts of profit used in computing the respective rates shown 
in Table 20 are the corresponding mill earnings shown in Table 18, 
except that for a few companies, where Table 18 shows net earnings 
for more or less than the year, the accounts have been put on an 
annual basis. They include all profits incidental to the business of 
making and distributing wheat flour as carried on by the 37 com- 
panies. For example, any profits or losses made on barley or rye 
flour in 1917-18 were included with the profits on wheat flour in 
computing the rates shown in the table. Two reasons made this 
method of treating profits advisable. First, it appeared probable 
that most of the business in coarse-grain products used as substitutes 



COSTS, PRICES, AND PROFITS. 7& 

for wheat flour was of a temporary character and that the mills 
would largely discontinue it on the return of normal conditions. 
Second, it was carried on to a large extent with the same plant and 
equipment that had previously been used in the wheat-flour business, 
and the records furnished no really satisfactory means of dividing 
investment or operating accounts between the wheat-flour business 
and the business in substitutes.^" 

As already noted, according to the Bureau of the Census, 1913-14 
was not a good year in the milling business. Such general information 
as the Commission had obtained concerning milling conditions for 
several years prior to 1913-14 as well as definite information obtained 
from a number of mills m regard to conditions in 1912-13 indicates 
that the period of relative depression in the milling industry covered 
a number of years prior to 1913-14. Nevertheless, the 37 companies 
were doing a very satisfactory business in 1913-14 and the North- 
western group had apparently been even more prosperous the year 
before. 

The table shows that in round numbers the aggregate average 
investment of the 37 companies in 1913-14 amounted to $44,000,000 
and that in 1917-18 it had increased to §66,000,000. This increase 
of 50 per cent is^ of course, somewhat less than the increase of invest- 
ment from the beginning of the year 1913-14 to the end of the 
year 1917-18, which has already been discussed in section 6. 

In spite of the reputed poor business conditions for the milling 
industry in 1913-14 the 37 companies realized a profit of 12.6 per 
cent on their investment. Under the stimulus to busmess due to the 
opening of the war in 1914-15, which was accompanied by an export 
of wheat and flour which advanced prices rapidly, profits in that year 
were increased to 17.2 per cent. In 1915-16 with an unparaUeled 
supply of wheat and flour in the United States the demand from 
Europe also fell off very greatly. Apparently, in consequence of 
this change from the situation in 1914-15, the average profit of the 
37 companies dropped to 13.1 per cent. These conditions were aU 
reversed before the end of 1916-17. Indeed, throughout most of the 
latter half of that year there appeared to be no limit on the price that 
purchasers were willing to pay for flour. The natural result was an 
increase in the profit of the 37 companies during 1916-17 to 38.4 per 
cent. 

Conditions of scarcity continued throughout 1917-18. The 
stabilization of the price of wheat through Government regulation 
and the agreement in regard to millers' margin of profit had their 
effect on the situation. Nevertheless, Table 20 shows that the 37 
companies realized a profit of 34.1 per cent in that year. It has 

*• See p. 79 for approximate segregation of coarse-grain operating receipts and expenditures in 1917-13. 



74 COMMERCIAL, WHEAT-FLOUR MILLING. 

already been noted that this rate of return does not fully represent 
the profit realized on their sales to the public. -^ 

The average investment used by the Northwestern group amounted 
to $26,700,000 in 1913-14 and increased to $41,300,000 in 1917-18. 
In other words, the investment of the Northwestern group consti- 
tuted over 60 per cent of the total investment of the 37 companies. 
During the five years it increased slightly more than 50 per cent 
while the investment of the Southwestern group almost doubled, 
and that of the Eastern group increased less than 20 per cent. 

In 1913-14 the Northwestern group realized a profit of 13.8 per 
cent on its average investment; in 1914-15, 19.4 per cent. Tu'o 
years later in 1916-17 its profit was 44.7 per cent, over three times 
the rate in 1913-14 and considerably over twice the rate in 1914-15. 
In 1915-16 the profit of this group had decreased to 15.7 per cent, 
but this decrease had been accompanied by an increase in its sales 
from 25,090,000 barrels of flour to 30,364,000 barrels. This large 
increase in the sales of the Northwestern group was made during 
a year in which the Southwestern group increased its sales less than 
5 per cent, and the Eastern group actually lost business. Again, in 
1917-18, the profit of the Northwestern group decreased — dropping 
back to 32.7 per cent. During the two high-profit years the sales of 
the group averaged only about 24 million barrels annually. 

The average investment of the Southewstern group increased from 
$6,300,000 in 1913-14 to $11,800,000 in 1917-18. Earnings of this 
gi^oup were at the rate of 11.3 per cent in 1913-14, but increased 
under the change in conditions because of the European war to 
20.9 per cent in 1914-15. It wiU be noted that the increase in rate 
of return on investment was somewhat larger for the Southwestern 
group in this year than for the Northwestern. A probable explana- 
tion for this difference is found in the fact that the hard spring wheat 
crop of 1914 fell off sharply both in quantity and quality. (See 
Exhibit VI.) In 1915-16 the rate of profit reahzed for the South- 
western group dropped to 12.5 per cent — that is, conditions for the 
two groups reversed themselves. The decrease in profit for the 
Southwestern in 1915-16 being considerably more than for the 
Northwestern. The greater relative prosperity of the Northwestern 
group in 1915-16 was without doubt due to the large crop of excellent 
hard spring wheat. Profits of the Southwestern group may have 
been affected, however, by the poor quality and excess moisture 
content of the winter wheat crop raised in 1915. 

The profits of the Southwestern group in 1916-17 show the effect 
of the great scarcity of flour and the heavy European demand for it 
in that year — the rate of return realized by the group increasing to 
34.2 per cent. This was an advance of 175 per cent over the 12.5 
per cent realized in 1915-16. In spite of the very great increase in 



COSTS, PRICES, AND PROFITS. 75 

its investment, the Southwestern group was able to increase the rate 
of return reahzed on it to 42.6 per cent in 1917-18. 

It will be noted that the profit of the Southwestern group in 
1917-18 (42,6 per cent) was practically 10 per cent in excess of the 
32.7 per cent shown for the Northwestern group in the same year. 
As a matter of fact, it is not positively established that the South- 
western group has sold flour to the trade at a higher profit than that 
of the Northwestern group. Two causes were responsible for the 
difference shown in the table. The Northwestern group sold a larger 
quantity of flour to the Government below cost toward the close of 
1917-18 than the Southwestern. Furthermore, the mill year of the 
Northwestern group runs through July and August, while that of 
the Southwestern ends in June. As a result of this difference in the 
years, the business of the Northwestern group in 1916-17 extended 
two months further than that of the Southwestern into the high- 
price period resulting from the wheat and flour panic of the spring 
of 1917. These two profitable months were, of course, included in 
the Southwestern's mill year, 1917-18, and unquestionably had their 
effect on the high rate of profit realized by that group. If the two 
years, 1916-17 and 1917-18, are thrown together, this peculiar effect 
of the difference in the mill years of the two groups is neutralized. 
Consequently a simple average of their rates of profit for the two 
years gives approximately the same figure. 

Rates of profits realized by the Eastern group during the five-year 
period are strikingly in contrast with those realized by the other two 
groups. As might be expected from the lower rate of return, the 
investment shows no such increase for this group as for the other two. 
In 1913-14 it amounted to $10,700,000, and even under the extraordi- 
nary stimulus of war conditions it increased by less than $2,000,000 
during this period. 

Taking into account all information available, it appears quite 
probable that the year 1913-14 was a comparatively profitable year 
for the Eastern group, although the rate of return on its investment 
for that year, shown in the table (p. 72) was only 10.5 per cent. 
Under the stimulus of an increased supply of wheat through the 
eastern part of the country, this group increased its sales over 15 
per cent, but the rate of profit, for causes which are not apparent, 
fell to 9.1 per cent in 1914-15 and even lower in the succeeding year. 
The rate realized in 1916-17 was 22.8 per cent or but little over half 
that realized by the Northwestern group. In 1917-18 the effect of an 
apparently unlimited demand for flour at any price resulted in an 
advance of the rate for the Eastern group to 30.8 per cent. 



76 



COMMERCIAL WHEAT-FLOUR MILLING. 



Section 8. Sales and profit on sales. 

The following table shows the amount of flour sales and the rate of 
profit on such sales for the 37 companies and also for each group, 
year by year, during the five-year period covered by this report: 

Table 21. — Sales and per cent of profit on sales, by groups and by years, 1913-14 to 

1917- 18. 





37 companies. 


Northwestern group. 


Southwestern group. 


Eastern group. 


Year. 


Flour sales. 


Per 

cent 

of 

profit. 


Flour sales. 


Per 

cent 

of 

profit. 


Flour sales. 


Per 

cent 

of 

profit. 


Flour sales. 


Per 

cent 

of 

profit. 


1913-14 

1914-15 

1915-16 

1916-17 

1917-18 


?159,656,875.41 
212,058,742.22 
227,969,626.22 
314,316,579.54 
354,192,286.93 


3.4 

3.7 
2.7 
65 
5.3 


$112,152,428.59 
142,287,338.55 
157,638,606.32 
220,611,222.52 
232,622,282.35 


3.3 
3.8 
2.9 
6.9 
4.6 


$19,987,920.76 
29,608,088.32 
30,922,0,55.56 
48,147,980.25 
59,639,224.88 


3.5 
4.9 
3.2 
6.1 

7.8 


$27,516,526.06 
40,163,315.35 
39,408,964:34 
45,557,376.77 
61,930,779.70 


39 
2.5 
1.6 
4.9 
5.6 



There has been no investigation of the flour-millmg industry of the 
United States sufficiently extensive to establish a typical satisfactory 
rate of profit on sales for the industry as a whole. The great excess 
of Hour-making capacity over flour consumption, the surplus supply 
of wheat and also of flour, the relative simplicity of flour production, 
and the small exports of wheat and flour in some recent years (notably 
m the fiscal year 1905, see p. 12) all indicate that wheat-flour milling 
under normal conditions would not be expected to realize as large 
profits, either on sales or investment, as are realized by those indus- 
tries in which demand appears to be expanding at a much more rapid 
rate than population. Table 21 shows that during the first three 
years covered, the average profit on sales was less than 3.5 per cent. 
Nevertheless, according to Table 20, the average investment for these 
companies increased from $43,687,911.12 in 1913-14 to $48,248,643.87 
in 1915-16. This showing appears to indicate that favorably situ- 
ated mills will prosper on a profit of less than 4 per cent on sales 
even when the price of flour is at a fairly low level. 

The increase in prices during the five years covered by the report 
was such that the receipts from sales of 38,450,000 barrels in 1913-14 
amounted to only $159,656,875.41, while receipts from sales of only 
34,659,000 barrels m 1917-18 amounted to $354,192,286.93. In 
spito of an increase of 90 per cent in the price at which flour was sold 
in the last two years of the five, the 37 companies advanced their 
average rate of profit on sales to nearly 6 per cent. 

The rate of profit realized on the sales b}^ the 37 companies in 
1913-14 was 3.4 per cent. With advancing prices in 1914-15, due 
to increased demand from Europe on account of the war, the rate 
increased to 3.7 per cent. In 1915-16 the European countries were 
apparently able to supply their demands at lower prices from other 



COSTS, PRICES, AND PEOFITS. 77 

countries. As a consequence the average price realized by the 37 
companies fell off and the rate of profit on sales decreased to 2.7 
per cent. With the complete change in condition in 1916-17 
(referred to in preceding section) the profit on sales advanced to 
6.5 per cent, but under Government regulations in the following 
year was brought back to 5.3 per cent. 

The rate of profit on sales for the Northwestern group fell below 3 
per cent in only one year of the five. That was the year 1915-16, 
when it was 2.9 per cent. In that year this group realized practically 
16 per cent profit on its investment. In 1916-17 the rate of profit 
on sales for this group was 6.9 per cent, or considerably over twice as 
much. The rate of 4.6 per cent shown for 1917-18 would have been 
higher if sales had not been made to the Government at less than costs. 

The amount of sales by the Southwestern group in the last year 
of the period was practically three times that in the first year. In 
no .year of the five did its rate of profit fall to 3 per cent, although in 
1915-16, when competition with the Northwestern group was excep- 
tionally strong and the wheat supply of the Southwestern group was 
defective in quality, the rate of profit realized on its sales fell to 3.2 per 
cent. In spite of the fact that its mill 3'ear 1916-1 7 did not include the 
very high-price months of Juh^ and August, 1917, the Southwestern 
group realized a profit on sales of 6.1 per cent. This increase of 
between 50 and 60 per cent in the amount of sales and of nearly 
100 per cent in the rate of profit on sales resulted in the advance of 
175 per cent in the rate of return on investment already noted. 
(See p. 74.) 

The effect of the flour and wheat panic in the spring of 1917 is 
evident in the profits of the Southwestern group in 1917-18. The 
price at which its flour was sold increased from $7.76 to $10.44 per 
barrel. Consequently, in spite of a decrease in the number of barrels 
sold from 6,200,000 in 1916-17 to 5,700,000 in 1917-18, its sales 
advanced to practically $60,000,000 and the profit on sales to practi- 
cally 8 per cent. This meant a profit of over $5,000,000, or 43 ])er 
cent, on an investment of $11,800,000. 

The showing for the Eastern group is quite different. Instead of 
a 200 per cent increase in sales, Table 21 shows for that group an 
increase of about 125 per cent, from $27,500,000 to $61,900,000. In 
spite of this relatively slow growth in sales, the rate of profit realized, 
3.9 per cent in 1913-14 and 5.6 per cent in 1917-18, showed no such 
advance as was shown for the Southwestern group. A decrease in 
sales for this group in 1915-16 was accompanied by a decrease in the 
rate of profit on sales, with the result, already noted, that the group 
made only 6.5 per cent on its investment in that year. 



78 



COMMERCIAL WHEAT-FLOUR MILLING. 



Section 9. Average investment, receipts, cost plus interest, and profit 

per barrel of flour. 

Average per barrel figures for the 37 companies. — The 
following table shows the average investment, receipts, cost plus 
interest, and profit per barrel of flour for the 37 companies. 

Table 22. — Average investment, receipts, cost plus interest, and profit per barrel of flour 
sold of the 37 companies by years, 1913-14 to 1917-18. 



1917-18 



Investment per barrel 

Receipts per barrel 

Cost plus interest per barrel . 
Profit less interest per barrel. 



1913-14 


1914-15 


1915-16 


1916-17 


$1.14 


$1.21 


$1.11 


$1.45 


4.15 


5.55 


5.25 


8.55 


4.01 


5.34 


5.11 


8.00 


.14 


.21 


.U 


.55 



$1.90 

10.22 

9.57 

.65 



RELATIVE INCREASE OR DECREASE. 



Investment per barrel 

Receipts per barrel 

Cost plus interest per barrel . . 
Profit less interest per barrel. 



100 


103 


97 


127 


100 


134 


127 


206 


100 


133 


127 


200 


100 


150 


100 


393 



167 
246 
239 
464 



The investment figures for the 37 companies shown in Table 22 
were obtained by dividing the total investment in their milling 
business by the number of barrels of wheat flour sold. These figures 
include the capital used in miscellaneous milling operations. This 
method of computing the investment per barrel was entirely satis- 
factory prior to 1917-18, because sales of other cereal products were 
so small that including them with the flour sales made no change 
in the average figure per barrel. It was impossible to continue this 
method of computing average receipts per barrel after the great 
increase in the output of coarse-grain products in 1917-18, as it would 
have resulted in considerable changes from the figures obtained by 
using wheat-flour sales alone. Receipts from sales of flour were 
therefore separated from the receipts from sales of other cereal 
products. This would have made a corresponding segregation of 
the investment used in that part of the business in 1917-18 desirable, 
but it was found to be impracticable. 

In order to obtain a cost and profit per barrel comparable with the 
investment per barrel shown in Table 22, miscellaneous milling profits 
were deducted from the cost of flour and thus added to profit. In 
this way a profit of 65 cents per barrel of wheat flour sold was obtained 
for comparison with the investment of SI. 90 per barrel. This 65- 
cent profit was not realized on the average receipts of S10.22 per 
barrel of flour, which include no receipts from coarse-grain products. 

To obtain an approximate cost and profit per barrel comparable 
with the $10.22 receipts in 1917-18 and with the costs and profits in 
other years, receipts and expenditures have been divided as fairly 
as possible between wheat flour and miscellaneous milling operations. 



COSTS, PRICES, AND PROFITS. 79 

Although the results are not entirely satisfactory, it is probable that 
when the operations of all these companies are combined the figures 
obtained are approximately accurate. This segregation of the 
accounts shows an approximate profit on miscellaneous milling in 
1917-18 of 11 cents per barrel of wheat flour sold. As the item of 
cost plus interest shown in Table 22 was obtained by deducting this 
profit on miscellaneous milling from the cost charged directly to 
flour, it follows that when it is not deducted, cost plus interest per 
barrel in 1917-18 is increased from $9.57 to $9.68, and the profit is 
decreased from 65 cents to 54 cents. 

The item of interest which is added to cost in the table is made up 
of interest on short-time loans and some discounts, less credits of a 
similar character. The information available in regard to these 
transactions is not sufficient to determine even approximately the 
average amount of short-time funds employed in the business. Since 
it was impossible to increase investment by adding short-time funds 
used, adding interest paid on such funds to profits could not be justi- 
fied. Consequently this net interest charge was added to cost in 
ascertaining the profit per barrel, shown in Table 22. 

This interest account increased from 2 and 3 cents in the earlier 
years to 5 cents in 1916-17. This makes it practically certain that 
the mills were using considerably larger amounts of short-time loans 
in that year. It is also probable that the decrease in interest to 4 
cents per barrel in 1917-18 indicates that they were borrowing less 
mone}^ than the year before. This difference may, however, have 
been largely due to higher rates of interest in 1916-17. It v^ as not 
feasible to obtain sufficient information on this subject to answer 
this and similar questions. 

As already noted, some sales of coarse grain products were included 
with the flour sales prior to 1917-18. Furthermore, the flour ac- 
counts show minor debits and credits aside from actual receipts from 
flour. Nevertheless, the receipts per barrel shown in Table 22 rep- 
resent with a fair degree of accuracy the fluctuations in the actual 
price of wheat dour sold by the 37 companies. 

Table 22 shows that the 37 companies increased their investment 
per barrel of flour 67 per cent during the five 3^ears, from $1.14 in 
1913-14 to $1.90 in 1917-18. During the first three years there was 
no material change. Indeed, in 1915-16 the average investment of 
the 37 companies was 3 per cent less than it had been in the year 
1913-14. A marked change during 1916-17, the third year of the 
war, increased the investment 30 per cent, from $1.11 to Si. 45 per 
barrel. 

This increase of 34 cents was very largely due to the higher prices 
paid for wheat in the last half of 1916-17 and the resultant higher 
value of flour and wheat held in stock at the close of that year. In 



80 COMMERCIAL WHEAT-FLOUK MILLING. 

July and August, 1916, prices ^vcre not appreciably higher than the 
average during the first three years covered by the table, but the 
effect of the wheat and f]our panic of the spring of 1917 was to advance 
these prices to the highest point known in many years. In fact, 
prices at the close of the year 1916-17 were considerably above those 
maintained during the year 1917-18, although the investment shown 
for 1916-17, obtained, as already noted, by averaging the investment 
at the beginning and end of the year, is 45 cents less than the invest- 
ment in 1917-18. 

The prices of wheat and flour during 1917-18 were fairly well sta- 
bilized by Government regulation. The investment of $1.90 per 
barrel shown for that year is, therefore, much more typical of the 
investment throughout the year than the average of $1.45 shown for 
1916-17. It should be noted, however, that the increase in invest- 
ment per barrel in 1916-17 and 1917-18 was largely due to the 
decrease in number of barrels of flour sold, as compared with 1915-16 
(see Table 16), and to some extent also to the necessity of making 
certain changes in the equipment of the mills because of the greatly 
increased production of coarse grain products in 1917-18. (See p. 61 .) 

Compilation of an entirely satisfactory statement of the increase in 
prices of wheat flour from 1913-14 to 1917-18 vras an impossibiUty. 
The sales accounts which were used showed aggregate amounts of 
flour sales, which included minor credits and charges, the net amounts 
of which could not be determined. Such credits and charges were, 
therefore, necessarily included in the net receipts for flour, used in 
compiling Table 24. Nevertheless, the net receipts so compiled show 
with approximate accuracy the actual fluctuations in the price of 
flour sold by the 37 companies. 

Table 22 shows an advance in average receipts per barrel from 
$4.15 in 1913-14 to $10.22 in 1917-18. The price level for the first 
two years of the war was practically 30 per cent above the 1913-14 
level. The high prices in the spring of 1917 advanced the 1916-17 
average to $8.55 — 106 per cent above the 1913-14 level. In 1917-18, 
practically the last year of the war, flour prices, as represented by 
sales of these companies, had advanced to 146 per cent above the 
prewar level. 

Attention has already been called (see p. 42) to the fact that in the 
years 1911-14 the prices of flour were at a relatively low level. Certain 
factors that tended to hold the prices at this low level in 1913-14 are 
of interest in connection with the advance in prices during the war. 
The Food Administration's compilation of available statistics shows 
that the supply of wheat in the United States during the mill year 
1913-14 was probably larger than it had ever been before. In addi- 
tion to the large yield of wheat in 1913, its quality was excellent 
throughout the United States and its weight per bushel' was excep- 



COSTS, PRICES, AND PROFITS. 81 

tionally high. (wSee Exhibit VI.) Probabh^ as a result of the effect 
of this large harvest upon the prices received by the farmers, they 
used, according to the best available information, some 200 per cent 
more wheat as feed for live stock in 1913-14 than they use under 
normal crop and market conditions. 

The harvest of 1914, it is true, was larger than that of 1913, but 
the extraordinary exports t'o Europe on account of the war decreased 
the supply remaining for use in the United States. Furthermore, in 
the principal hard spring wheat States the crop was relatively small 
and the wheat of poor quality. These changes in the situation are 
reflected in the advance in the price of flour from $4.15 in 1913-14 
to $5.55 in 1914-15. 

This advance of 34 per cent in the price of flour from 1913-14 to 
1914-15 was not fully maintained in the following year, when the 
average price was $5.25 per barrel, or only 27 per cent above the 
1913-14 level. European demand for wheat from the United States 
was not maintained during 1915-16 at the high level of the previous 
year. Furthermore, the wheat crop in the Northwest was large and 
of high quality. In other sections of the country also the crop was 
larger than had ever been raised before, nlthough of inferior quality, 
and carrying an extraordinarily heavy percentage of moisture. 
The result of these changes in the situation was a decrease of 30 
cents per barrel in the average price for the 37 companies in 1915-16, 
which, however, was entirely due to a decrease of nearly 50 cents 
per barrel in the very large sales made by the Northwestern group 
in that year. (See p. 60.) 

Reference has already been made to the great difference in the 
price of flour at the beginning and end of the year 1916-17. It fol- 
lows that the average receipts of $8.55 per l)arrel are not representa- 
tive of prices prevailing over any considerable part of the year. 
Nevertheless, they show that, taking the year together, the average 
cost of flour to the consumer was $3.30 per barrel more than it had 
been throughout the year 1915-16. 

The discussion of cost per barrel has for the most part been de- 
ferred to section 10, where an analysis of total cost per barrel is pre- 
sented. Of course, the fundamental factors influencing the fluctua- 
tions in cost wore those which have already been referred to in the 
preceding discussion of the advance in prices. 

Table 22 shows an increase in the profit realized by the 37 com- 
panies from 14 cents per barrel in 1913-14 to 65 cents in 1917-18, an 
advance of 364 per cent. It is necessary, however, to keep in mind 
the fact that approximately 11 cents of the 65 cents shown in the 
table was profit realized on sales of coarse grain products and that 
this total profit is used because that is the only way to show the cor- 

183256°— 20 6 



82 



COMMERCIAL WHEAT-FLOUR MILLING. 



rect relation of profit per barrel of flour to investment per barrel. 
If the 54 cents, approximate profit realized directly from the sales of 
flour alone, is substituted for the 65 cents shown in the table, the 
increase over 1913-14 will drop to less than 300 per cent — in fact, to 
less than the 293 per cent advance shown for 1916-17. 

In spite of an increase of SI. 10 in the receipts per barrel between 
1913-14 and 1915-16 the profit realized, 14 cents per barrel, was 
exactly the same in both years. The year between, however, 
showed a profit of 21 cents, an increase of 50 per cent over 1913-14. 

Comparison of increases in the investment per barrel of 

THE 37 companies AND OF THE DIFFERENT GROUPS.— The following 

table shows the investment per barrel of flour sold by the 37 compa- 
nies for each of the years 1913-14 to 1917-18, with corresponding 
figures for the different groups, the per cent of increase for each 
group annually, and the percentage relations of investment for the 
difi'erent groups in each year. 

Table 23. — Comparison of increases in the investment per barrel of the S7 companies 
and of the different groups, by years, 1913-14 to 1917-18. 



1913-14 



1914-15 



1915-16 



1916-17 



1917-18 



37 companies 

Northwestern group . 
Southwestern group . 
Eastern group 



$1.14 



1.26 
1.74 



$1.21 
1.11 
1.18 
1.57 



$1.11 
.97 
1.27 
1.58 



$1.45 
1.35 
1.47 
1.85 



$1.90 
1.79 
2.06 
2.17 



RELATIVE PERCENTAGE INCREASE OR DECREASE. 



37 companies 

Northwestern group . 
Southwestern group . 
Eastern group 



100 


106 


97 


127 


100 


113 


99 


138 


100 


94 


100 


117 


100 


90 


91 


106 



167 
183 
163 
125 



PERCENTAGE RELATIONS OF GROUPS. 



37 companies 

Northwestern group . 
Southwestern group . 
Eastern group 



100 


100 


100 


100 


86 


92 


87 


93 


111 


98 


114 


101 


153 


130 


142 


128 



100 
94 
108 
114 



Table 23 makes it clear that the increase of 67 per cent in the 
investment of the 37 companies combined was the result of very 
difi'erent changes in the investment shown for the different groups. 
At the beginning of the period the investment of the Northwestern 
group was relatively very much smaller than that of either of the 
other groups. During the five years covered by the table, however, 
81 cents was added to its investment, and only 43 cents to the invest- 
ment of the Eastern group. The addition to the investment of the 
Southwestern group was 80 cents, or practically the same as that for 
the Northwestern. 



COSTS, PRICES, AND PROFITS. 83 

Measured in percentages, the increase in the investment of the 
Northwestern group was 83 per cent, of the Southwestern 63 per cent, 
and of the Eastern only 25 per cent. The result of these ch:niges 
was a gradual approach of the relative investment of the different 
groups to the same figure. The percentage relations in Table 23 
show that while the investment of the Northwestern group was 14 
per cent below the average investment for the entire group in 1913-14, 
it was only 6 per cent below the average in 1917-18. On the other 
hand, the investment for the Southwestern group, which was 11 per 
cent above the average in 1913-14, was only 8 per cent above the 
average in the later year. The approach of the investment for the 
Eastern group to the common average was even more striking, falling 
from an excess of 53 per cent in the first year of the period to only 14 
per cent above the average in the last year. 

The principal factor in this increasing similarity in the amount per 
barrel invested by the different groups was, without doubt, the ad- 
vancing price of wheat and flour carried in inventories. The stabili- 
zation of wheat prices through Government restrictions in 1917-18 
also contributed to this result. An indication of the effect of the 
advancing price of wheat is found in the fact that if a mill had carried 
thesamequantity of wheat in stock in 1917-18 as it carried in 1913-14, 
according to the price figures in Table 14, it would have had two and 
one-half times as much money invested in wheat. The effect of the 
greater similarity in the cost of wheat for the different groups in 
1917-18, which was undoubtedly to some extent due to Government 
stabilization, is indicated by a comparison of the figures for the 
Eastern and the Northwestern groups in 1913-14 and 1916-17. 
In the earlier year the investment per barrel of the Eastern group 
was 76 cents larger than that of the Northwestern; in the latter year 
only 50 cents larger. This change was evidently due in part to the 
fact that in 1913-14 the wheat used in a barrel of flour cost the 
Eastern group 38 cents more than it cost the Northwestern (see 
p. 118), but that in 1916-17 the cost of wheat to the Northwestern 
group was 39 cents per barrel more than to the Eastern. 

A. like contrary change in investment per barrel for the North- 
western group and the Southwestern group is found in the first two 
years of the period covered by the table, which shows an increase in 
the investment of the Northwestern from 98 cents per barrel to SI. 11, 
and a decrease for the Southwestern group from $1.26 to SI. 18. 
In the first year the cost of wheat per barrel for the two groups was 
the same, but in the second year, 1914-15, it was 62 cents more per 
barrel for the Northwestern than for the Southwestern. The result 
of these changes was that, measured by percentage relations, the in- 
vesttnonts j^er barrel for the two groups were nearer together than in 
any other year, that of the Northwestern having advanced to within 



84 



COMMERCIAL WHEAT-FLOUR MILLING. 



8 per cent of the average for the 37 companies, while that for the 
Southwestern had fallen to 2 per cent below the averagef^he amount 
of investment for the two groups being, as already noted, SI. 11 
and $1.18. The opposite trend of the investment per barrel of these 
two groups in 1915-16 is also explained in large part by the fact tliat 
in that year the cost of wheat had again become practically the same 
for the two groups. It is interesting to note also that the excep- 
tionally high cost of wheat for the Northwestern group in 1916-17, 
99 cents per barrel in excess of that for the Southwestern, again 
brought the per barrel investment of the two groups almost as near 
to each other as in 1914-15. 
Comparison of advances in prices, or receipts per barrel, 

OF THE 37 COMPANIES, AND OF THE DIFFERENT GROUPS. — The fol- 
lowing table shows average receipts per barrel of flour sold for the 
37 companies and for each of the different groups, by years, from 
1913-14 to 1917-18, inclusive: 



Table 24. — Comparison of advances in prices, or receipts per barrel, of the 37 companies 
and of the different groups, by years, 1913-14 to 1917-18. 



1913-14 1914-15 1915-16 1916-17 1917-18 



37 companies 

Northwestern gronp. 
Southwestern group. 
Eastern group 



$4. 15 
4.11 
4.00 
4.46 



$5.55 
5.67 
5.04 
5.53 



$5.25 
5.19 
5.04 
5.68 



S8. 55 
8.77 
7.76 
8.39 



$10. 22 
10.06 
10.44 
10.62 



RELATIVE PERCENTAGE INCREASE OR DECREASE. 



37 companies 

Northwestern c;roup. 
Southwestern group. 
Eastern group 



100 


134 


127 


206 


100 


138 


126 


213 


100 


128 


126 


194 


100 


124 


127 


188 



246 
255 
261 
238 



PERCENTAGE RELATIONS BY GROUPS. 



37 companies 

Northwestern tjronp . 
Southwestern group. 
Eastern group 



100 


100 


100 


100 


99 


102 


99 


103 


96 


91 


96 


91 


108 


100 


108 


98 



100 
98 
102 
104 



The advance in the average price of the 37 companies from $4.15 
to $10.22, or 146 per cent,^" has already been noted. This average 
advance of $6.07 per barrel was greater than the advance of $5.95 
in the Northwest, but less than the advance in the Southwest or 
East. Nevertheless, because of the relatively low price of flour for 
the Northwestern group in 1913-14 (99 per cent of the average) 
and the relatively high price for the Eastern group (108 per cent of 
the average) the rate of advance for the Northwestern group was 155 
per cent, while that for the Eastern was only 138 per cent. 

55 The flour sold under Government restrictions m 1917-18 was probably of poorer quality on 
an average than that sold in the other four years, and it also included sales to the Government at less 
than cost 



COSTS, PRICES, AND PROFITS. 85 

The tendency of prices received by the three groups to draw to- 
gether is quite as noticea])le as the corresponding tendency in regard 
to investment ah-etidy discussed. This tendency is strikingly illus- 
trated by the advance of the price in the Southwest from 15 cents 
belQw the average in 1013-14 to 22 cents above in 1917-18. Ex- 
pressed in percentages, this means that in 1913-14 the South- 
western group received only 96 per cent of the average price and in 
1917-18, 102 per cent. Also that prices for this group advanced 161 
per cent, while, as just noted, prices farther east advanced only 138 
per cent. This tendency of prices for all groups to approach each 
other was, of course, largely due to the causes responsible for the 
same tendency in the average investment per barrel for the different 
groups already discussed. It must be noted, furthermore, that if 
sales of the Northwestern group in the two high-price months of 
July and August, 1917, had been included in 1917-18 figures, as were 
thfDse of the Southwestern, and if sales to the Government in 1918 
below cost, which were according to available information much 
larger in the Northwest than in the Southwest, had been excluded in 
both cases, it is quite possible that the receipts per barrel for these 
two groups would have been practically the same instead of varying 
so much as the $10.06 for the Northwestern, and the SI 0.44 for the 
Southwestern, now shown in the table. 

The predominating effect of the larger business of the North- 
western group on averages for the 37 companies is shown by the nar- 
row range of the variations in its price per barrel from the average. 
In no year did it fall more than 2 per cent below the average, and 
only in 1916-17 was it as much as 3 per cent above the average. 

The noticeable decrease in the relative price in the Southwestern 
group from 96 in 1913-14 to 91 in 1914-15, and in that of the Eastern 
from 108 in 1913-14 to 100 in 1914-15, were, however, largely due to 
the fact that the respective advances for those two groups in that year 
were only 26 and 24 per cent, while the corresponding advance for 
the Northwestern group was 38 per cent. 

The advance in prices during the first three years covered by the 
table, 1913-14 to 1915-16, was practically the same — approximately 
27 .per cent. Consequently, the figures showing the relation of prices 
for the different groups are exactly the same for these years. With 
the renewal of a much stronger foreign demand in 1916-17, relative 
prices for the different groups went back to approximately the figures 
for 1914-15. It is not clear, however, that this change in the export 
situation was the exclusive, or even the most important, factor af- 
fecting the relatively greater advance for the Northwestern group, 
of prices in 1916-17 over those in 1915-16, expressed by 87 per cent 
of the 1913-14 price, while the corresponding figures for the South- 
western and Eastern groups were only 68 and 61 per cent respectively. 



86 



COMMERCIAL WHEAT-FLOUR MILLING. 



Comparison of cost plus interest per barrel of the 37 

COMPANIES AND OF THE DIFFERENT GROUPS. TllO following table 

shows the average cost per barrel of flour sold, together with the in- 
terest paid on short-time loans, for the 37 companies and also for 
each of the three groups, in each of the five years from 1913-14 to 
1917-18, inclusive; also the rate of increase in cost, using cost in 
1913-14 as a base, and percentage relations of cost for each company 
to cost for the 37 companies, by years. 

Table 25. — Comparison of cost plus interest per barrel of the 37 companies and the 
different groups, by years, 1913-14 to 1917-18. 



1913-14 1914-15 1915-16 1916-17 1917-18 



37 companies 

Northwestern croup . 
Southwestern group. 
Eastern group 



$4.01 
3.98 
3.86 
4.28 



$5.34 
5.46 
4.79 
5. 38 



$5.11 
5.04 
4.88 
5.58 



$8.00 
8.17 
7.28 
7.96 



$9.57 
9.48 
9.56 
9.95 



RELATIVE PERCENTAGE INCREASE OR DECREASE. 



37 companies 

Northwestern eroup. 
Southwestern group.. 
Eastern group 



100 


133 


127 


200 


100 


137 


127 


205 


100 


124 


. 126 


189 


100 


126 


130 


186 



239 
238 
248 
232 



PERCENTAGE RELATIONS BY GROUPS. 



37 companies 

Northwestern group . 
Southwestern group . 
Eastern group 



100 


100 


100 


100 


99 


102 


99 


102 


96 


90 


95 


91 


107 


101 


109 


100 



100 



100 
104 



As already noted, discussion of factors affecting cost fluctuations 
has been largely deferred until consideration of the analyses of the 
cost of makmg and sellmg a barrel of flour is taken up in section 10. 
Table 25 has been inserted at this point, however, in order to present 
the more important cost fluctuations, in relatively close connection 
with corresponding fluctuations in prices and profits. 

A glance at the relative increases and decreases in Tables 24 and 
25 makes it clear that average receipts advanced more rapidly, with 
relatively few exceptions, than costs of production and distribution. 
In 1915-16, a year of relatively low profits, the rate of advance over 
the 1913-14 level was practically the same for cost plus interest as 
for prices. 

As was to have been expected. Table 25 shows the same drawing 
together of costs plus interest for the different groups that was shown 
for investments and prices in Tables 23 and 24. 

As in the case of prices, the rate of increase shown in cost plus 
interest is greater for the Northwestern group than for the Eastern, 
although the amomit of increase for the latter is $5.67 as compared 
with only $5.50 for the former. This, of course, is due to the 
fact that cost plus interest was 30 cents more for the Eastern group 



COSTS, PRICES, AND PROFITS. 



87 



in 1913-14 than for the Northwestern, their relative costs being ex- 
pressed by 107 and 99 when cost plus interest for the 37 companies 
is represented by 100. 

There was less difference in the rate of advance for the different 
groups in cost plus interest than in price. For the Southwestern group 
the rate of advance in price from 1913-14 to 1917-18 had been 23 
per cent greater than for the Eastern, but its increase of 148 per cent 
in cost plus interest was only 16 pomts greater than the increase of 
132 per cent for the Eastern. The result of this relatively more 
rapid advance of cost-plus interest was the much smaller rate of 
increase in profit per barrel for the Eastern group compared with 
that of the Southwestern, shown m Table 26. 

The percentage relations in Table 25 show a similar striking like- 
ness in relative cost plus interest in the first and third years covered 
by the table, and also in the second and fourth, to that in prices, 
which was commented on in the discussion of Table 24. For the 
Northwestern group relative cost plus interest is expressed by prac- 
tically the same figures as relative prices. On the other hand, the 
fact that relative cost plus mterest of the Southwestern group in 
1917-18 is the same as the average for the 37 companies, while its 
relative price was 2 per cent above the average reflects the conditions 
which resulted in the much larger rate of profit realized by that group 
than by the other groups in 1917-18. 

Comparison of profit per barrel of the 37 companies and of 
THE DIFFERENT GROUPS. — The following table shows the profit per 
barrel of flour sold for the 37 companies for each year from 1913-14 
to 1917-18, together with that realized by the different groups in 
the same years; the increases and decreases in profit for the different 
groups, by years; and the relations of profits for the different groups 
in each year, the profit of the 37 companies being represented by 100. 

Table 26. — Comparison of profit per barrel of the 37 companies and of the different 
groups, by years, 1913-14 to 1917-18. 



1913-14 1914-15 1915-16 191&-17 1917-18 



37 companies 

Northwestern group . 
Southwestern group . 
Eastern group 



$0.14 
.13 
.14 
.18 



JO. 21 
.21 
.25 
.15 



$0.14 
.15 
.16 
.10 



$0.55 



.48 
.43 



$0.65 
.58 



RELATIVE PERCENTAGE INCREASE OR DECREASE. 



37 companies 

Northwestern group . 
Southwestern group. 
Eastern group 



100 


150 


100 


393 


100 


162 


115 


462 


100 


179 


114 


343 


100 


83 


66 


239 



464 
446 
629 
372 



PERCENTAGE RELATIONS BY GROUPS. 



37 companies 

Northwestern group . 
Southwestern group . 
Eastern group 



100 


100 


100 


100 


93 


100 


107 


109 


100 


119 


114 


87 


129 


71 


71 


78 



100 



135 
103 



88 COMMERCIAL WHEAT-FLOUR MILLING. 

Comment has already been made on the fact that the profit shown 
for 1917-18 m Table 22 is only for comparison with the^in vestment 
per barrel. (See p. 78.) For example, the increase of 364 per cent 
in the profit of the 37 companies from 1913-14 to 1917-18 would be 
misleading if accomit was not also taken of the increase of 67 per 
cent in their investment. Furthermore, it must not be forgotten 
that the profits shown in Table 26 are the profits on all mill products 
sold. It is only in 1917-18, however, that this combined profit is 
appreciably difi^erent from the profit on wheat flour alone. Never- 
theless, the combined profit has been shown for 1917-18, although 
it is appreciably more than the profit on wheat flour sales alone in 
that year because it was impossible to obtain a satisfactory profit 
per barrel figure on wheat flour alone, for the different groups. 

It is obvious that the per barrel profit figures shown above are 
not comparable with the 25 cents per barrel margin agreed upon by 
the Food Administration and the millers for a part of the year 
1917-18. Not only is the period covered different, but the 25 cents 
margin was at no time construed as covering aU the operations of 
the companies, including their wheat elevator and jobbing depart- 
ments. Table 26, on the contrary, covers all transactions carried 
on with the investment charged to the wheat-flour business. 

Table 26 shows an increase in profit per barrel over the five-year 
period of 45 cents for the Northwestern group, 74 cents for the 
Southwestern, and 49 cents for the Eastern. Measured in percent- 
ages, the respective increases were 346 for the Northwestern, 529 for 
the Southwestern, and only 272 for the Eastern. 

During the first thi-ee years covered by the table the increases over 
the profits in 1913-14 do not show sufficient difference for the North- 
western and Southwestern groups to call for comment. On the other 
hand, while these two groups were making some 15 per cent more 
profit in 1915-16 than in 1913-14, the profit of the Eastern group 
had gone down 44 per cent. In 1916-17 the Southwestern group 
also fell considerably behind the Northwestern, the increase for the 
latter amounting to 362 per cent while that for the former was 243 
per cent and that for the Eastern only 139 per cent, above the 1913-14 
figure. It is quite possible that a considerable part of the greater in- 
crease in profit for the Northwestern group in 1916-17 may have been 
due to the fact that the 1916-17 mill year of the Northwestern group 
included two very high-price months in the summer of 1917, after the 
close of the mill year of the Southwestern group. This view of the 
situation is supported by the fact that in 1917-18 the profit of the 
S<outhwestern group and, also, of the Eastern group, both showed 
remarkable increases (the mill year of these two groups is practically 
identical), while that of the Northwestern group decreased. It is 



. COSTS, PRICES, AND PROFITS. 89 

impossible to determine from annual figm'es how much this difference 
in the 12 months covered by the mill years of the different groups 
affect the figures shown in Table 26. 

The relative rates of profit per barrel of flour show much greater 
variation between the several groups than was shown by investment, 
receipts, or cost plus interest figures. In no two years does there 
appear to be any similarity in these relative profits for the different 
groups. In 1915-16 and 1916-17 the relative profit for the North- 
western group was 7 per cent and 9 per cent, respectively, above the 
average of the 37 companies. On the other hand, in the first and 
last years of the table it was, respectively, 7 per cent and 11 per cent 
below the average. In three years of the five the Southwestern 
group showed a profit considerably in excess of the average. In 
1917-18 this excess amounted to 35 per cent. In the preceding year, 
the only one in which its profit was less than the average, the differ- 
ence was only 13 per cent. The best showing made by the Eastern 
group was in 1913-14, when its profit per barrel was 29 per cent above 
the average. In the two following years it was 29 per cent below the 
average. In 1916-17 it was 22 per cent below, but in 1917-18, 3 per 
cent above. 

Note.- — The Commission ha? compiled data from the accounts of 17 other companiea 
for the years 1913-14 to 1916-17 and of 65 companies in 1917-18. These concerns are, 
in a general way, competitors of the 37 companies, selling in the same markets and 
making approximately the same kinds of flour. Their accounts have been very care- 
fully re\dsed and the information is probably as reliable as that obtained from the 37 
companies, except that profits have been thrown from one year to another through the 
use of inventories at market price, which the Commission was unable to re\dse. It 
should be noted that in 1917-18 results are shown for about four times aa many mills 
as in the previous years. 

The average annual business for each of these mills was, roughly, one-fourth the 
average for the 37 companies; that is, not far from 250,000 barrels each per year. The 
accounts furnish no conclusive e\ddence that this difference in quantity of business 
resulted in any difference in the amount of capital employed per barrel of flour. 
Throwing the first two years of the war together to ob^date to some extent the defect 
referred to in the preceding paragraph, it appears that these smaller companies made an 
appreciably larger rate of profit on investment than was made by the 37 companies. 
Pursuing the same method with the last two years, the situation was reversed and the 
37 companies show larger profits than the smaller companies. This change may be 
due in part to bringing in a larger number of small mills. The accounts show, however, 
that the advance in prices was much less for the small companies than for the larger 
ones. 

The earnings of 65 companies on their milling business in 1917-18 gave them an 
average profit of 55 cents per barrel of flour sold, while the corresponding profit for 
the 37 companies was 65 cents. Of these per barrel profits the 65 companies made 
about 4^ cents on miscellaneous milling and the 37 companies somewhere near 11 
centa. 



90 



COMMERCIAL WHEAT-FLOUIi MILLING. 



Section 10. — Costs in wheat-flour milling. 

Analysis of per- barrel cost. — ^An analysis of the -eost of mak- 
ing and selling a barrel of wheat flour based on expenditures of the 37 
companies is presented in the following table. Corresponding analyses 
for the different groups are given in Exhibit VII. 

Table 27. — Anahjsis of the costs of the 37 companies in maling and selling a barrel of 
'wheat flour, by years, 1913-14 to 1917-18. 



Item of cost. 


1913-14 


1914-15 


1915-16 


1916-17 


1917-18 


Wheat 


$3.96 
.27 
.22 
.30 


$5.42 
.23 
.22 
.33 


$5.09 
.24 
.21 
.31 


58.32 
.31 
.28 
.42 


$9.72 




.47 




.37 




.41 








4.75 
.76 


6.20 

.84 


5.85 

. 77 


9.33 
1.26 


10.97 




1.29 








3.99 


5.36 


5.08 


8.07 


9.68 






Mill operating costs: 

Mill labor, power, and miscellaneous operating 


.17 

.02 
.03 


.17 

.02 
.03 


.16 
.02 
.03 


.22 
.03 
.03 


.28 




.06 




.03 






Total 


.22 


.22 


.21 


.28 


.37 






Total operating, general and selling costs' 


.52 


.55 


.52 


.70 


.78 



1 Based on barrels of flour produced. 

2 Actual figures, 0.0316. 

3 These costs do not include interest charges, which amounted to 2 cents in 1914, 3 cents in 1915, 2 cents in 
1916, 5 cents in 1917, and 4 cents in 1918. 

The information presented in Table 27, it should be remembered, 
is not applicable to the entire milling business of the United States. 
It is important, however, because it represents, as near as could be 
ascertained without undue expenditure of time and money, the 
actual cost of about 35 per cent of the flour produced in the United 
States, the sales of which are so widely distributed that they largely 
determine the price level in practically every commercial flour market 
east of the Rocky Mountains, and even affect in some degree the range 
of flour prices on the Pacific coast. 

The table shows that the prewar cost of making and seUmg a 
barrel of flour and delivering it at milling points or miU branch 
houses, generally packed in cotton or paper sacks, was $3.99. The 
effect of the first two years of the European war was to increase the 
total cost per barrel about 30 per cent — to $5.36 in 1914-15 and $5.08 
in 1915-16. The semipanic conditions at the beginning of the war 
apparently increased the cost of wheat in 1914 considerably, but the 
world-wide bumper w^heat crop of 1915 resulted in a somewhat lower 
cost in the following year. 

In the early part of 1916-17 costs were not appreciably higher than 
the general level for the two preceding years, but an increasing de- 



COSTS, PRICES, AND PROFITS. 91 

mand from Europe began to affect the price of wheat early in the year. 
The resulting- advance of prices culminated in the panic of the spring 
of 1917. In May of that year wheat sold in Chicago for $3.45 — more 
than a dollar higher than the price fixed by the Government in the 
following fall. Other costs also advanced considerably, with the 
result that the average net cost per barrel of flour made by the 37 
companies throughout the year 1916-17 was $8.07. 

The price of wheat was stabilized by the Government early in the 
mill year 1917-18. As a consequence, the average cost of $9.68 
per barrel, shown in Table 27 for that year, is fairly representative 
of the cost of producing and distributing a barrel of flour throughout 
the year. It appears from the changes reviewed in the preceding 
paragraphs that the effect of the war on the cost of wheat flour in the 
United States was an advance of fully 140 per cent. The advances 
in the different items of cost were as follows: Wheat, 146 per cent; 
packages, 74 per cent; mill operating costs, 68 per cent; general 
and selling expenses, 37 per cent. In 1917-18 the wheat used in a 
barrel of flour cost $5.76 more than it did in 1913-14, while aU other 
costs had increased only 46 cents. 

The deduction from total cost, charged to the production of feed, 
increased from 76 cents in 1913-14 to $1.29 in 1917-18. The millers 
would undoubtedly have realized considerably more than $1.29 for 
feed in 1917-18 had it not been for Government price restrictions. 

Cost of wheat. — Table 27 shows clearly the importance of the 
cost of wheat in the manufacture of flour. Usually about 70 per 
cent of the wheat ground is sold in the form of flour. A relatively 
simple process crushes the grain and removes the offal. Flour is 
sometimes sold at the mill for less than the cost of the wheat used 
in making it. This preponderance of the cost of wheat in wheat- 
flour costs, together with the influence of the quality and quantity 
of easily available wheat on the prosperity of milling enterprises 
(see Exhibit VI), calls for a more detailed discussion of the supply of 
wheat. 

Demand and supply factors affecting the miller's cost of loheat. — 
The following discussion of the wheat crop of the United States and 
the various uses made of that crop in recent years is based largely 
on the United States Food Administration's compilation of data 
collected by the Government and by statisticians of wheat and flour 
trade publications. Much of the available information is based on 
estimates. Nevertheless, the care with which these estimates are 
made warrants their use in comparative tables and the acceptance 
of the indicated changes in wheat production and consumption with 
a considerable degree of confidence. In any satisfactory discussion 
of the situation in the United States, however, it is necessary to have 



92 



COMMERCIAL WHEAT-FLOUR MILLING. 



some information in regard to the production and consumption of 
wheat in other countries and in earher years.*** ^^ 

Changes in the stock of wlieat on hand July 1, of each of the five 
years under review, the wheat crop, the net exports of wheat, and 
the indicated quantity of wheat used in the United States in each 
year is shown in the following table : 

Table 28. — The wheat crop of the United States and quantities exported, consumed, and 
left in stock, by years, 1913-14 to 1917-18. 

[In millions of bushels.] 



Crop year. 


Stock a on 
Julyl. 


Crop.6 


Increase 

or 
decrease 
in stock. 


Wheat 
used and 
exported. 


Net c 
exports. 


Wheat 
used in 
United 
States. 


1913-14 .. . 


lOS 
84 
62 

177 
55 
21 


763 
891 
1,026 
636 
637 


- 24 

- 22 
+115 
-122 

- 34 


787 
913 
911 
758 
671 


91 
259 

168 
126 

7 


696 


1914-15 


654 


1915-16 


743 


1916-17 


632 


1917-18 


664 


1918-19 

















<o Available data show a world wheat crop which did not vary greatly from year to year and which aver- 
aged practically 2i billion bushels annually for the 7 years beginning with 1891. In 1898 the crop jumped to 
nearly 3 billion bushels, and the average for the next 10 years was but little above that figure, A\'iih a varia- 
tion of less than 15 per cent up or down in anv one year. In 1909 the crop rose to over Z\ billion bushels, 
and it did not fall below that figure again until the beginning of the European war. In 1913, and again in 
1915, the crop exceeded 4 billion bushels. Over 90 per cent of this wheat is produced north of the Equator. 
As late as 1915 the United States produced practically one-fourth of the entire crop. It had produced about 
the same proportion of the total crop in 1891 and in 1901. These three years were the high points in its con- 
tribution to the world's supply over the period covered by available data. A period of relatively low pro- 
duction in this country covered the four years 1893 to 1896, inclusive. Other low-production years were 
1904, 1911, and 1916. In none of these years did the crop in the United States materially exceed one-si.xth 
of the world crop. 

Other important producing countries are Russia, Canada, Argentina. Australia, Roumania, and British 
India. Tbe average annual exports of these countries in excess of their imports from other countries (in- 
cluding flour as wheat) in the five-year period just prior to the war, 1909-1913, amoimted to 610 millicm 
bushels. For different countries tliey were, in romid numbers, as follows: 

Russia 165 million bushels. 

United States 105 million bushels. 

Canada 95 million bushels. 

Argentina 85 million bushels. 

Australia 55 million bushels. 

Roumania 55 million bushels. 

British India 50 million bushels. 

Eight countries consumed three-fourths of the world's supply during these same years. Their con- 
sumption was as follows: 

Russia 650 million bushels. 

Umted States 580 million bushels. 

France 360 million bushels. 

British India 300 million bushels. 

United Kingdom 275 million bushels. 

Austria-Hungary 240 million bushels. 

Italy 235 million bushels. 

Germany 220 million bushels. 

Four of these countries, United Kingdom, Germany, Italy, and France, were the great importing coun- 
tries. Their average annual net importations of wheat during the five years preceding the war, 1909 to 
1913, were about 380 million bushels. Belgium was importing 50 million bushels and other Eiu-opean 
countries about 75 million bushels during the same period. 

The statistical information in the preceding paragraph was taken from Documentary I>eaflets of the 
International Institute of -Agriculture, Jime, 1919, pp. 14 and 15. Data available in regard to the world 
supply of wheat and its distribution since the opening of the European war are very incomplete. 

a Based on the United States Food Administration's compilation of data collected by the Government 
and trade statistical organizations. 
i> Statistical Abstract, 1918, p. 159. 
e Exclusive of flour. Statistical Abstract, 1918, pp. 431, 478, and 510. 



COSTS, PRICES, AND PROFITS. 93 

Before proceeding to the discussion of Table 28, attention should 
again be called to the increase in the country's wheat crop referred 
to on page 12. 

In recent years the country has used in its mills and otherwise 
90 million bushels a year more than it produced 20 years ago, and the 
crop of 10 years ago would have provided no wheat for export except 
as flour during the last six years. Table 28 shows that the remark- 
able increase in the wheat crops of the United States culminated in 
a harvest of 1,026,000,000 bushels in 1915. In 1916 the crop 
amounted to 636 million bushels, and in 1917 to 637 millions; in 
neither year was it much more than 60 per cent of the crop in 1915. 

Gradually increasing stocks had been held over from tne harvests 
preceding that of 1913. As a result, the stock on hand on July 1 of 
that year amounted to 108 million busnels lo this there ^\as added 
during the year a crop of 763 million bushels. Under these circum- 
sbances the ordinary means o^ disposing of wheat failed the farmer, 
and the United States Food Administration data mdicatc that he 
increased the cjuantity of wheat used as stock feed from 15 milhon 
bushels in the preceding year to 55 million bushels in 1913-14. He 
also sold his wheat for 79 cents per bushel, or 6 cents less than the aver- 
age price realized from the 1912 crop. By feeding it to stock and sell- 
ing it at a reduced price the quantity of wheat used in the United 
States in 1913-14 was increased to 696 million bushels, or 79 million 
bushels more than the consumption in the precedmg year. Apparently 
the low price and the use of wheat as stock feed was discouraging to 
the spring-wheat farmers, who reduced their wheat acreage appreciably 
in the spring of 1914. The farmers in the hard-wheat States of the 
Southwest, not so easily discouraged, put millions of acres more into 
wheat in the fall of 1913 than ever before. Consequently, there was 
an increase in the crop of wheat in the States of Colorado, Kansas, 
Nebraska, Oklahoma, and Texas from 190,138,000 bushels in 1913 
to 318,669,000 bushels in 1914. The resultmg crop of 891 million 
bushels for the entire country made it possible to meet the extraor- 
dinary export demands of the opening year of the war with a 
reduction in stocks from the beginnmg to the end of the crop year, 
1914-15, amounting to only 22 million bushels. 

Ihat year the average price realized by the farmers throughout 
the United States advanced to 99 cents, and, as was naturally to be 
expected, the acreage sown to wheat increased, namely, from 54,661,- 
000 in 1914 to 61,173,000 in 1915. Yet even this remarkable acreage 
would have resulted in no great increase in stocks had it not been 
for the greatly increased yield per acre in the hard spring-wheat 
States of the Northwest, which resulted in almost doubling the crop 
harvested in Minnesota, Montana, North Dakota, South Dakota, 
and Wyoming. The good fortune of the spring-wheat farmers, 



94 COMMERCIAL WHEAT-FLOUR MILLING. 

though offset to some extent by a decreased yield per acre in the 
winter-wheat States, resulted in the great harvest of 1915 noted above. 
Heavy crops m Canada, Australia, and Argentina, together with 
favorable conditions of transportation, made Europe more independ- 
ent of the United States in the following year, and the net exports of 
wheat dropped from 259 to 168 million bushels. Throughout the 
larger part of the country the wheat raised was of poor quality and 
probabl}^, in part, for that reason it was fed to live stock in large 
quantities. Nevertheless, as Table 28 shows, the stock on hand was 
115 million bushels larger on July 1, 1916, than it had been 12 months 
earlier. Total consumption in the United States had increased to 
743 million bushels. 

In the face of this accumulation of stock, wheat sown in 1916 fell 
off from 61 to 57 million acres. This smaller acreage, accompanied 
by a lower yield per acre, resulted in the extraordinary reduction in 
the crop already referred to. Table 28 shows that the wheat crop 
of 1916 was practically all consumed in the United States. Early 
in the mill year 1916-17 the European countries engaged in the war 
realized for the first time the extent of the emergency in regard to 
their food supplies. Their strenuous efforts to provide for this emer- 
gency resulted in the wheat and flour panic of the spring of 1917. 
Although the small crop made it necessarj^ to reduce shipments, 
net exports for that year amounted to 126 million bushels. As a 
consequence of the advance in prices during the year, the reported 
average price realized by the farmer for the crop of 1916 amounted 
to $1.44. Millers were ready to use all available wheat and stocks 
went down more than they had gone up on account of the enormous 
harvest of 1915. Stocks of flour measured in bushels of wheat also 
fell oft' about 12 million bushels. 

The farmers of the winter wheat section had put in their wheat 
for the crop of 1917 before the advance in prices. Consequently, 
there was no great increase in the acreage sown and mifavorable crop 
conditions reduced the number of acres harvested, compared with the 
previous year, about 7 millions. Although the spring-wheat farm- 
ers increased the acreage somewhat and the yield per acre was better, 
the entire crop showed no considerable increase, amountmg to only 
637 million bushels. The table shows that the Consumption in the 
United vStates that year exceeded the crop raised by over 25 million 
bushels. Nevertheless, in response to the urgent demand from Eu- 
rope, exports in excess of imports amoimted to 7 million bushels, and 
reduced the stock of wheat on hand at the end of the five-year period 
to 21 million bushels. 

Table 28 furnishes an excellent illustration of the steadiness of the 
consumption of wheat within a given area and the variabilit}^ of the 
supply. Maximum consumption of wheat shown for any year was 



COSTS, PRICES, AND PROFITS. 



95 



743 million bushels in 1915-16, only 10 per cent above the average 
for the five years. The minimum consumption, 632 million bushels in 
1916-17, was only 7 per cent below the average. The difference 
between the maximum and the minimum consumption was 111 mil- 
lion bushels, but the difference shown between the largest and the 
smallest crop was 390 million bushels. 

The safety valves in this situation are net exports and reserve 
stocks which are continually moving up and down. In 1914-15 net 
exports were 37 times as much as in 1917-18, and the reserves of 
wheat at the end of 1915-16, 177 million bushels, were more than 8 
times the 21 millions left at the end of 1917-18. 

Estimates of the annual consumption of wheat in the United States, 
separated into feed for live stock, seed, and mill consumption, to- 
gether with net exports of flour expressed as wheat, are shown in 
the following table: 

Table 29. — Analysis of the consumption of wheat in the United States, by years, 1913-14 

to 1917-18. 

[In millions of bushels.] 



Crop year. 



Total 


Fed to 


Used for 


MiU 


tion.i 


stock.2 


seed.2 • 


consump- 
tion.3 


696 


55 


75 


566 


6.54 


20 


84 


550 


743 


74 


79 


590 


632 


13 


82 


537 


664 


13 


89 


562 



Exported 
as tlour.< 



1913-14. 
1914-15. 
1915-16. 
1916-17. 
1917-18. 



53.1 
72.5 
68.4 
53.0 
95.8 



1 See Table 28. 

2 From compilation by the United States Food Administration. 
> Includes an insignificant quantity used in distilling. 

< Statistical Abstract, 1918, pp. 431, 478, and 510. 

The mill consumption of wheat shown in Table 29 is obtained by 
subtracting the estimated quantity used for seed and fed to live 
live stock from estimated total consumption. By this method the 
entire waste in storage and transportation is apparently included in 
the figures for mill consumption, which also covers an insignificant 
quantity (which has no effect on the figures expressed m millions) 
of wheat used in distilleries. 

According to the census the merchant mills of the country used 
545,728,431 bushels of wheat m 1914. This is 96 per cent of the 
amount shown above as used in mill products and wasted during the 
mill year 1913-14. The same authority shows practically the same 
per cent of a corresponding supply figure as used in 1904, but for 1909 
the per cent shown as used is only 92. For the year 1917-18 Food 
Admmistration reports show 93 per cent of the available supply indi- 
cated above as used in flour. This difference is probably due in 
considerable part to consumption by custom mills, and the element 
of waste referred to m the preceding paragraph, but it also empha- 



96 COMMEECIAL WHEAT-FLOUK MILLING. 

sizes the fact that the data m Table 22 are only the best available 
estimates. 

The consumption of wheat in the United States shown for 1913-14 
in Table 29 was relatively large, as might have been expected from 
the accumulation of wheat at the beginning of the year, already 
referred to, and to the fact that the average price realized by the 
farmer from the 1913 crop, 79 cents per bushel, was at the lowest 
point reached in years — about 20 per cent lower than the price 
five years earUer and less than 40 per cent of the price realized from 
crops of 1917 and 1918. The natural consequences of this situation 
are shown by Table 29 in the larger quantity of wheat fed to live 
stock, the relatively small use for seed, and the heavy mill consump- 
tion. The quantity of export shown for 1913-14 by the table indi- 
cates that similar conditions prevailed in other countries, as ship- 
ments of flour abroad had been much larger in earlier years. 

The figures in the table reflect fairly well the situation that devel- 
oped in 1914-15 because of the war. Due to the very large exports 
of wheat in that year, shown in Table 28, the farmers found it un- 
profitable to feed so much wheat to live stock but, on the contrary, 
increased the quantity sown from 75 million to 84 million bushels. 
Millers found their cost of wheat increased considerably, and as 
the demand from abroad was to a large extent for wheat as dis- 
tinguished from wheat flour, mill consumption decreased from 
566 millions to 550 milHons in 1914-15. 

Conditions that brought about the increase in total consumption 
to 743 miUion bushels in 1915-16 have already been reviewed. The 
enormous crop decreased prices in spite of the war demand and, as 
was to be expected, the farmer increased the quantity fed to live 
stock and decreased the quantity sown. It is probable that the big 
increase in the quantity fed to live stock was, as already noted, due 
to the poor quality of the wheat raised in 1915 quite as much as to 
the low price. Furthermore, the considerable increase shown in the 
mill consumption from 550 million bushels in 1914-15 to 590 million 
bushels in 1915-16 was not due to the larger crop throughout the 
country but, in a considerable degree, to the excellent quality and 
the very large production of hard spring wheat in 1915. The de- 
clining exports of wheat flour in 1915-16 is especially to be noted 
in connection with the fact that Table 14 shows a decline of 30 
cents in the price of flour received by the millers in that year, while 
the average price received by the farmer for wheat went down only 
1 cent per bushel. 

The effect of the nearly 40 per cent decrease in the crop of 1916 
as compared with that of 1915 is clearly shown in the decline of total 
consumption from 743 million bushels in 1915-16 to 632 million 
bushels in 1916-17. The table shows the effects normally to be 



COSTS, PRICES, AND PROFITS. 



97 



expected in the use of wheat for stock and in increased quantity 
used for seed. In spite of a crop 390 milhon bushels short of that 
in the preceding year and increase in the cost of wheat to the miller 
as represented by the 37 companies from SI. 12 per bushel to SI. 81, 
mill consumption decreased only 53 million bushels — to 537 millions. 
Export of flour continued to drop, reaching the same figure as in 
1913-14. 

Data for the year 1917-18 presented in Table 29 reflect clearly 
the critical condition in that year, due to the war. The use of 13 
million bushels of wheat as live-stock feed, in spite of the small 
crop and the increase in total consumption to 664 million bushels 
(see Table 28), indicates that even under conditions of very great 
scarcity in the wheat supply there is a certain proportion of the crop 
that can not be milled profitably. The increased use of wheat for 
seed was of course in direct response to appeals for the largest pos- 
sible production. Neither was the considerable increase in the mill 
consumption to 562 million bushels in 1917-18 the result of a normal 
response of commercial milling to the conditions of scarcity indicated 
by the increase in exports of flour expressed as wheat, from 53 
million bushels to 95.8 million bushels. Comment has already been 
made on the fact that in this year the production of many large com- 
mercial mills was very considerably decreased. (See p. 59.) The 
increase in mill consumption shown by Table 29 was therefore due 
to a considerable development under Government regulation of the 
production of wheat flour in mills of small and medium size through- 
out the country. 

WJieat used per harrel of flour. — The quantity of wheat used in pro- 
ducing a barrel of flour and the cost of wheat per bushel and per 
barrel, for the 37 companies and for the different groups, is shown, 
by years, from 1913-14 to 1917-18, in the following table: 

Table 30. — Wheat costs of the 37 companies, by years, 1913-14 to 1917-18. 



Wheat used (bushels per barrel) . 



Northwestern group. 
Southwestern group . 
Eastern group 



Cost of wheat used (per bushel). 



Northwestern group. 
Southwestern group . 
Eastern group 



Cost of wheat per barrel of flour. 



Northwestern group . 
Southwestern group . 
Eastern group 



183256°— 2C 



4.40 
4.51 
4.48 



$0.90 



.89 
.86 
.95 



3.90 
3.90 
4.28 



4.52 



1915-16 



1916-17 



4.52 
4.51 
4.51 



4.53 
4.59 
4.56 



51.20 



1.22 
1.09 
1.22 



5.52 
4.90 
5.50 



$1.12 



1.10 
1.08 
1.23 

5.09 

4.99 
4.97 
5.63 



4.60 



4.64 
4.53 
4.52 



$1.81 



1.84 
1.67 
1.80 



8.55 
7.56 
8.16 



1917-18 



4.40 
4.55 
4.48 



$2.19 



2.18 
2.15 

2.2« 



9.61 
9.77 
10.15 



98 COMMERCIAL WHEAT-FLOUR MILLING. 

The data in Table 30 confirms the well-established presumption 
that a barrel of good flour can be made from 4^- bushels of wheat. 
Taken in connection with the census figures referred to on page 13, 
which show an average consumption for the United States of 4.7 
bushels per barrel, they make it fairly certain that t£e commercial 
mills use less wheat per barrel of flour ground than the smaller 
neighborhood mills. This, of course, is only confirmatory of the 
accepted opinion that the superior equipment of the large mills 
gives them an advantage in this respect over the small mills. 

The considerable variation in the wheat used per barrel of flour in 
different years and by different groups is the result of so many more 
or less conflicting causes, that only a brief reference to some of the 
more important is feasible in this report. The table shows that 
considerable more wheat was used per barrel of flour in the inter- 
mediate years 1914-15 to 1916-17 than in 1913-14 and 1917-18. 
The considerable decrease in the Ciuantity per barrel used in 1917-18 
was the direct effect of the Government's requirement, over a good 
part of the year, that only 4.4 bushels of wheat should be used per 
barrel of flour. 

General market information indicates that an increasing demand 
for the higher grade of patent flour on the one hand, and for meats 
and dairy products on the other, might have had something to do 
with this increased consumption of wheat per barrel of flourin 1915-16 
and 1916-17. Increased demand for meats and dairy products 
must necessarily reflect itself in an increased demand for feed, and 
the more feed a miller takes from a bushel of wheat the less flour will 
remain. 

Data in regard to the c|uantity and quality of the wheat harvest 
in different years indicate that changes in these two factors were 
more influential than changes in demand for different mill products 
in bringing about the increase in wheat used per barrel of flour in 
different years and different sections. For example, the increase in 
1915-16 for the 37 companies coincides with the billion-bushel crop 
and the prevalence of excessive moisture in most of the wheat . ar- 
vested. In 1916-17, apparently because of decreased supply (see 
p. 95) the East and the Southwest used less wheat per barrel than the 
year before, but in spite of a very short crop in the Northwest that 
group used considerably more than in 1915-16. The poor c[uality 
and light weight of the hard spring wheat raised in 1916 probably 
explains why the Northwestern group used 4.64 bushels of wheat 
per barrel of flour ground in 1916-17. 

Cost of wheat per husliel. — -Table 30 shows that the average cost of 
wheat for the 37 companies was more than twice as much in 1916-17 
as in 1913-14. A fact not shown by the table is that the price in 



COSTS, PKICES, AND PROFITS. 99 

the last part of the mill year 1916-17 was over three times what it 
had been at its beginning. The success of the Government's efforts 
to stabilize wheat prices is shown by the increase of but little over 20 
per cent in the average cost to the mills from 1916-17 to 1917-18. 

The Eastern and Southwestern groups show higher relative costs 
in 1915-16 than might be expected; that is, they do not go down 
like those of the Northwest. Of course, the remarkable increase in 
the crop of the Northwest, together with the poor c[uality and high 
percentage of moisture, which increased the quantity used per barrel 
in other sections of the country, had much to do with holding up the 
relative cost per bushel for the Eastern and Southwestern groups. 

The cutting of the 1916 Northwestern crop to but little over a 
third of what it was in 1915 explains whj^ the cost of wheat used by 
the Northwestern group in 1916-17 was even higher than that paid 
by the Eastern group. It is also undoubtedly true that a part of 
this difference is due to the difference in the mill year repeatedly 
referred to. 

In 1917-18 under Government stabilization of wheat prices the 
respective costs of wheat per bushel for the three groups show about 
the variations to be expected from differences in transportation costs. 

Further light on the variations in cost per bushel of the different 
groups is furnished by sectional variations in the crops. The short 
crop of 1914 in the Northwest and the heavy crop in the Southwest 
are plainly reflected in an increase in the cost per bushel for the 
Northwest over 40 per cent greater than for the Southwest in 1914-15. 
Superior availability for export to Europe apparently held up the 
relative value of eastern wheat in spite of the increasing output. 

Cost of wheat per harrel of flour. — ^The discussions of crop and market 
conditions have already given the general causes of the increase in 
the cost per barrel by $1.46, or over 35 per cent, in 1914-15. The 
drop of 33 cents the next year resulted from the immense crop of 
1915 and the great reduction in exports of wheat. 

The salient facts are that after two years of war, wheat cost the 
millers only about 30 per cent more than it did prior to the war, but 
that in the two succeeding years short crops and submarines, rein- 
forced to some extent by various other factors, forced an advance 
to nearly 150 per cent above the prewar level. 



100 



COMMERCIAL WHEAT-FLOUR MILLING. 



Cost of packages. — The cost of packages per barrel of flour, for 
the 37 companies and the different groups, by years, frofa 1913-14 to 
1917-18, is shown in the following table: 

Table 31. — Cost of packages per barrel of flour of the 37 companies^ by groups and by 

years, 1913-14 to 1917-18. 



1917-18 



37 companies 

Northwestern groap 
Southwestern group 
Eastern group 



1913-14 


1914-15 


1915-16 


1916-17 


Cents. 


Cents. 


Cents. 


Cents. 


27 


23 


21 


31 


27 


23 


2.5 


32 


26 


22 


22 


28 


29 


25 


25 


32 



Cents. 



According to Table 31, the cost of packages for the different groups 
shows no such difference as the cost of wheat. When the variety of 
containers in which flour is sold is considered, and also the sales in 
bulk, the similarity of package costs per barrel is remarkable. Be- 
cause of the large use of cotton bags, the figures reflect the immedi- 
ate effect of the war in cutting down the price of cotton of the crop 
of 1914, but they did not increase nearly as much from 1914-15 to 
1917-18 as the higher price of cotton would lead one to expect. 
Whether the costs of sacks as compared with cotton and jute were 
relatively high in the earlier years does not appear from the available 
data. 

It was not feasible to make any general revision of cost of packages 
as reported by the companies. In some cases where important 
changes from actual cost were found, corrections were made. It did 
not appear probable that the large amount of work that a careful 
revision of inventories would require would make any considerable 
changes in the table as presented above. 

Operating costs, including repairs and depreciation. — Oper- 
ating costs in making a barrel of flour, including labor expenses, power 
and fuel expenses, and miscellaneous expenses directly connected 
with making the flour, together with charges for repairs and deprecia- 
tion, are shown for the 37 companies and for the different groups, by 
years, from 1913-14 to 1917-18, in the following table: 

Table 32. — Operating costs per barrel. of flour, including repairs and depreciation, of the 
37 companies, by groups and by years, 1913-14 to 1917-18. 



1917-18 

Cents. 
37 
36 
37 
37 



37 companies 

Northwestern group . 
Southwestern group . 
Eastern group 



1913-14 


1914-15 


1915-16 


1916-17 


Cents. 


Cents. 


Cents. 


Cents. 


22 


22 


21 


28 


20 


21 


20 


26 


26 


25 


25 


28 


27 


25 


25 


34 



Table 32 shows no appreciable increase in the cost of operation, 
including repairs and depreciation, during the first three years of the 
period covered, either for the 37 companies as a whole or for either 
of the groups. 



COSTS, PRICES, AND PROFITS. 



101 



In 1916-17 the effects of the war began to make themselves evi- 
dent. It should be remembered, however, that the average expenses 
as given in the table do not show the changing conditions throughout 
the year. 

The operating expenses shown for 1917-18 were 65 per cent greater 
than they were before the war and for more than two years after it 
started. Under Government regulation of the flour industry the cost 
of operation was practically the same in all groups. 

The lower cost shown above "for the Northwest, during the first 
four years, may have been due m part to the advantages of. large 
scale production (see p. 59). Thus the charge for depreciation in the 
Northwest was over a cent per barrel less than for the Eastern group 
of mills. Nevertheless, the greater increase in the costs of operation 
in the Northwest brought them practically^ to a level with those of 
the other groups in 1917-18. 

.Operating costs for the Northwest were increasing rapidly, even in 
1915-16, when the tables show a decrease per barrel. A heavy 
increase in expenses in that year was more than oflset in the per 
barrel figures by an mcrease of nearly 25 per cent in the production. 
The change in output for the two other groups was not sufficient to 
have any effect on the per barrel data. Thus the total expenses for 
repairs decreased slightly for each of the smaller groups, but increased 
from $636,000 m 1914-15 to $789,000 in 1915-16 for the North- 
western group without any appreciable change in the cost per barrel. 

It was impossible to analyze the expense accounts of the different 
mills in sufficient detail to determine the causes of these changes in 
the operating expenses of the different groups. It does appear, how- 
ever, that the bulk of the advance m costs for the Northwestern 
group in 1916-17 was incurred b}^ the four companies which have 
the largest output. The company which showed the gi^eatest increase 
in output had a heavy increase in per barrel expense for power and 
fuel. For the company showing the second largest increase in these 
expenses, the expenses involving labor or other local charges appar- 
ently increased less than those of a more miscellaneous character, 
such as su^jplies brought in from a distance. 

General and selling expenses per barrel of flour. — A table 
showing general and selling expenses for the 37 companies and for each 
group year by year during the five-year period is presented below: 

Table 33.^ — General and selling expenses per barrel of flour of the 37 companies, by 
groups and by years, 191S-14 to 1917-18. 



1913-14 1914-15 1915-16 1916-17 1917-18 



37 companies 

Northwestern group 
Southwestern group 
Eastern group 



Cents. 
30 
30 
25 
34 



Cents. 
33 
34 
25 
32 



Cents. 
31 
31 
24 
35 



Cents. 
42 
44 
31 
44 



Cents. 
41 
42 
36 
41 



102 



COMMERCIAL WHEAT-FLOUR MILLING. 



As in the case of operating expenses, it is not practicable to give 
a full anal3'sis or explanation of these items. It is interesting to 
note, however, certain contrasts between the figures for the different 
groups and also certain contrasts with the operating cost shown in 
Table 32. 

The figures for 1916-17 show the effect on the general and selling 
expense of the remarkable prosperity of the mills in that year. In 
spite of the advancing prices, Table 32 shows that the Northwestern 
group had an increase in operating ccst of only 6 cents per barrel, 
but Table 33 shows that general and selling expenses were increased 
by 13 cents per barrel. This reflects very considerable additions to 
the salaries paid the managers of the business and the managers of 
important branch houses. 

The full influence of large profits on the general and selling expenses 
of the Southwestern group was not felt until 1917-18. In that year 
these expenses advanced 50 per cent over those of two years before. 
Nevertheless, the general and selling expenses of this group over the 
entire period afforded no exception to the general rule that costs for 
the three groups tended to approach each other. In 1913-14 general 
and selling expenses for the Southwestern group had been 5 cents 
per barrel below the average and in 1917-18 the same difference 
persisted. Of course, this corresponds to a smaller percentage dif- 
^ference from the average in the last year than in the first. While 
these expenses for the Eastern group were 4 cents higher than for 
the Northwestern group in 1913-14, in 1917-18 they were higher for 
the Northwestern than for the Eastern. 

Operating, selling, and general expenses. — Operating ex- 
penses combined with general and selling expenses for the 37 com- 
panies and each of the groups, by years, from 1913-14 to 1917-18, 
are shown in the following table: 

Table 34. — Total operating, selling, and general expenses per barrel of flour of the 
37 companies, by groups and by years, 1913-14 to 1917-18. 



1913-14 1914-15 1915-16 1916-17 1917-18 



37 companies 

Northwestern group 
Southwestern group 
Eastern group 



Cents. 



Cents. 

00 

55 
50 
57 



Cents. 
52 
51 
49 
60 



Cents. 
70 

70 
59 

78 



Cents. 



This table confirms the fact already noted, that the costs of mak- 
ing and selling flour increased much more slowly than the cost of 
the materials and supplies used in its manufacture. While it shows 
an advance of practically 50 per cent in the costs of making and sell- 
ing the flour, an advance which amounts to only 26 cents for each 
barrel of flour, Table 27 shows an advance of $5.96 in the cost of 
the wheat used and packages required. 



COSTS, PRICES, AND PROFITS. * 103 

The variation in cost of making and selling flour for the different 
groups in 1913-14 was 11 cents, but in the last year of the period it 
had decreased to 7 cents, 'n 1913-14 these costs for the South- 
western group were 1 cent more than for the Northwestern group. 
In 1917-18 costs for the Northwestern were 7 cents more than those 
for the Southwestern. Of this 7 cents difference, 6 cents is accounted 
for by the excess of general and selling expenses of the former group 
over those of the latter in 1917-18. 

Section 11. Eelative efficiency of flour-milling companies. 

Quantity of output is generally regarded as an important element 
in the efficiency of commercial operation. " ndeed, from the discus- 
sion of localization and concentration of the wheat-flour milling 
industry in Chapter T, it appears that in the United States mills of 
less than 100,000 barrels output have for years been declining in 
importance, probably because they have been unable to compete 
^ccessfully with the larger concerns. The data reviewed there gave 
no indication, however, as to the relative efficiency of companies 
having an output of over 100,000 barrels, and it is important, there- 
fore, to consider the information afforded by the accouiits of the 
companies considered above which relates to this question. 

The information in regard to some of the companies is of such a 
character that it is more satisfactory for use in consolidated form, 
as in the preceding parts of this chapter, but the broader facts 
obtained by a comparison of different groups of these companies 
over a five-year period have presumably general validity. The 
abnormal condition prevailing in 1916-17 and 1917-18, however, 
exercised a disturbing influence on competitive conditions which may 
have altered somewhat the ordinary relations between companies of 
different size or different character of plant and equipment. 

One of the best indications of competitive efficiency is the rate of 
profit on investment. Low cost is also an indication of efficiency, 
but a low-cost concern may not have a very high rate of return 
where such low cost depends on large plant investment. Neverthe- 
less, low cost may be a factor that will enable a concern to weather 
the most severe price competition, but if the investment is relatively 
large it will tend to keep down the rate of return when prices are 
higher. 

The following table, which covers the total operations for the five- 
year period presented in previous tables, groups the 38 ^^ companies 
according to volume of sales and compares the investment, net earn- 
ings, and the ratios between them, it also compares the costs, 
profits, and the investment per barrel of flour. 

« One company which was absorbed by another at the end of the period was separately operated and is 
treated as a separate company in this table. 



104 



COlMMERCIAL WHEAT-FLOUR MILLING. 



Table 35. — Average investment, earnings, and rate of profit, together ivith costs, profits, 
and investments per barrel of 38 ivheat-flour milling companies grouped according to 
volume of sales, five-year period, 1913-14 to 1917-18.^ ^ 





Num- 
ber of 
com- 
panies. 


Barrels 
sold. 


Invest- 
ment. 


Earnings. 


Rate of 
earn- 
ings on 
invest- 
ment. 


Cost 

per 

barrel. 


Profit 

per 
barrel. 


Invest- 
ment 
per 
barrel. 


Group I;!! Over 1,000,000 barrels. 
Group II: 300,000 to 700,000 bar- 


7 
14 
17 


28,462,159 
6,831,837 
3, 283, 778 


143,489,771 
9,118,757 
4,774,209 


$9,691,270 

2,125,767 

946,623 


Per ct. 
22.2 

23.3 

19.8 


.?6.30 
6.14 
6.49 


$0. 34 
.31 
.29 


$1.53 
1.33 


Group III: Under 300,000 bar- 


1.45 






Total 


38 


38, 577, 774 


57,382,737 


12, 763, 660 


22.2 


6.29 


.33 


1.49 











1 Some of the re\'isions wliich were made by the Commission with respect to the financial results of these 
companies in the territorial grouping were not practicable in this grouping according to size, so that the 
aggregates and averages do not exactly agree. 

2 Includes one company with sales slightly under 1,000,000 barrels. 

The most striking fact shown by this table is the comparatively 
small difference in the average rate of profit for the different groups. 
The group having sales per company running from 300,000 to 700,000 
barrels had the highest rate of profit (23.3 per cent). The group with 
the smallest sales per company had the lowest rate (19.8 per cent). 
The rate of profit realized by the first group, which had by far the 
largest sales per company, was the same as the average for the 38 
companies (22.2 per cent). This group, however, includes one com- 
pany operating under exceptional conditions, apparently, and mth 
a low rate of profit; if this company were eliminated from the com- 
parison the average rate of })rofit of this group would be 25 per cent. 

Of considerable interest also are the figures for cost, profit, and 
investment per barrel. Group IT shows both the lowest average cost 
(S6.14) and the lowest average investment ($1.33) per barrel; its 
profit per barrel (31 cents), however, was less than the average. The 
rate of profit on investment of this group as already shown was the 
highest. The third group showed the highest cost per barrel ($6.49), 
the lowest profit per barrel (29 cents), and an investment per barrel 
somewhat under the average. This group made the lowest rate of 
profit on investment, as shown above, and appears to have been in 
the least favorable position. The first group, on the other hand, 
had a considerably higher cost per barrel (S6.30) than Group II, a 
somewhat higher average })rofit per barrel (34 cents), and a much 
higher average investment per barrel ($1.53). Its rate of return on 
investmxcnt therefore was slightly lower than that of Group 11. As 
already pointed out, if one company, which operated undpr excep- 
tional conditions apparentl}^, and with a low rate of profit, were 
eliminated from this group its rate of profit would be slightly higher 
than that of the second group. It may be noted that with this 
change the cost per barrel would be reduced to §6.27 and the invest- 



COSTS, PRICES, AND PROFITS. 105 

ment per barrel to ?1.32, though the profit per barrel would remain 
substantiall}" the same. 

Considering facts presented above and without ascribing a veiy 
high degree of accuracy to the data, it seems reasonable to conclude 
that size is not a decisive factor in determining the commercial effi- 
ciency of the larger wheat-flour milling companies. 

Section 12. Wheat-flour milling in Washington and Oregon. 

Idaho, which has been grouped with Washington and Oregon in 
tabulations of wheat and flour production in this report, has no mills 
of any considerable commercial importance. In fact, there is no dis- 
tinctly segregated wheat-flour industry in the two coast States. The 
important milling concerns are also the important wheat-marketing 
concerns. Their problem is to dispose of the surpkis wheat produced 
in that section in the most profitable form, whether that be flour, 
cereal foods, feeds, or grain. How much more important wheat 
irfarketing is on the Northwest coast than in the rest of the country 
is strikingly illustrated by the harvest of 1917. Outside of these 
three States the United States in that year produced hardly enough 
wheat to supply its mills and to seed its fields. But even in that low- 
crop year Washington, Oregon, and Idaho harvested not far from 
twice the wheat the}^ consumed in both those ways. 

Attention has already been called to the rapid development of 
milling in the Pacific Northwest because of its abundant wheat 
supply. (See p. 23.) From 1913-14 to 1917-18 the mills whose 
accounts were used by the Commission increased their output some- 
what, while the output in other sections of the country fell off. 

The data presented below do not show the progress of a strictly 
comparable group during the five years. It covers the flour sales of 
14 companies in the first three years, 15 in the fourth, and 16 in the 
fifth. These companies sold 3,659,917 barrels of flour for $13,283,- 
265.10 in 1913-14 and 4,590,600 barrels for $40,407,901.86 in 1917-18. 
It has not been possible to re%'ise these accounts as thoroughly as 
those of the 37 companies. Probably the most unsatisfactory point 
in this regard was the impracticability of revising inventories taken 
at market value instead of cost. 

The flour accounts showed receipts per barrel of flour as follows: 
In 1913--14, $3.83; 1914-15, S4.86; 1915-16, $4.47; 1916-17, $6.27; 
1917-18, $9.47. As in the case of the 37 companies, these flour 
accoimts contained some debits and credits aside from cash receipts 
for flour and cash discounts. These prices may be accepted, how- 
ever, as comparable from year to year, and it is therefore safe to say 
that the flour made in the Pacific Northwest sold for nearly 150 per 
cent more per barrel in 1917-18 than in 1913-14. The average annual 
mill value of the flour sold in the Pacific Northwest ran from 32 cents 



106 COMMERCIAL WHEAT-FLOUR MILLING. 

to $2.28 below the mill value of the eastern flour. The advance be- 
cause of the flour panic in the spring of 1917 was less than it was even 
in hard winter wheat flour, (See p. 84.) 

It is impracticable to discuss in this report the many factors that 
influence the prices received by millers in the Pacific Northwest. A 
few of the more important may be listed as follows: 

1. Competition in their own home market with the Montana hard 
spring wheat mills. 

2. Competition in California and the Southwest with the hard 
winter wheat mills of the Southwestern group. 

3. Competition in the cotton States with the soft wheat mills of 
the Eastern group. 

4. Fluctuations in demand for flour in the Orient and South 
America. 

It was not practicable to separate the investment in flour mflling 
from the investment in the cereal, feed, and grain enterprises of the 
concerns whose accounts were used. The per barrel investment 
figure, mcluding these subsidiary branches of the business, is the 
figure that is of practical importance and represents correctly the 
amount of capital employed per barrel of flour sold m the Pacific 
Northwest, This, therefore, is the figure that should be used for 
comparison with the more strictly wheat flour investment already 
shown for the eastern mills. 

In 1913-14 the investment computed per barrel of sales for the 
Pacific Northwest was $2.50; nearly 50 per cent more than was shown 
for the Eastern group, and considerably over twice what was used 
in the hard spring wheat mills. There was no such increase there 
during the five-year period as in the East. Indeed the Pacific group 
shows an increase of barely 10 per cent during the five years, in con- 
trast to the mcrease of 67 per cent for the 37 companies. While the 
reason for this difference is not clear it appears probable that Gov- 
ernment operations, which assured a market without the maintenance 
of grain, feed, and export departments on the same scale as in former 
years, was the most important factor. Another factor of consid- 
erable importance, however, was a greater increase in the use of 
short-tune loans not counted as investment. 

The character of the data obtained made it impossible to compute a 
satisfactory cost for wheat flour. The only practical method was 
to proceed as with investment and charge all income and all ex- 
penses to the flour account. It was the net income thus obtained 
which was used m computing the rate of return on investment and 
also the net income per barrel of flour sales. 

The changes in rate of return on investment fluctuate directly 
with the corresponding figure for eastern mills. Starting roughly 
at 6 per cent in 1913-14, they were three times that rate in the next 



COSTS, PRICES, AND PROFITS. 



107 



year, dropped back to 8 per cent in 1915-16, showed a nearly four- 
fold increase the next year, to 31 per cent, but fell to 21 per cent 
in 1917-18. 

The changes in per barrel profits were approximately parallel to 
those in the rate of return on mvestment. In 1913-14 they were 
15.5 cents; in 1914-15, 52.6 cents; in 1915-16, 24.8 cents; m 1916-17, 
85.7 cents; and in 1917-18, 58.7 cents. This group made 2^ times the 
profit per barrel that was made by the 37 companies in 1914-15. 
The profit per barrel was greater than that made by the 37 com- 
panies on account of the large miscellaneous business, but large 
investment resulted in the low rate of return already noted. 

The European war was, of course, the primary factor in the increase 
in profits. It took increased exports of wheat out of a decreased crop 
in the Pacific Northwest. The resulting scarcity of wheat in that 
section raised prices of feeds and miscellaneous products so that the 
net cost of flour per barrel was kept do^\^l and in that way, though 
the price of flour went up only $1.03 per barrel compared with an 
advance of SI. 40 for the 37 companies, the net effect was the much 
larger net profit referred to above. 

The relatively low rate of profit per barrel, and on investment, 
in 1915-16 was probably due to more competition from the East, 
because of the great increase in business done b}^ the hard spring 
wheat States in that year. Because of the impracticability of 
putting Ihe inventories of these companies on a cost basis, com- 
parisons are safer when the profit figures for the last two years are 
combhied. When this is done the resulting profit per barrel of flour 
is found to be (as in the first year of the five) somewhat higher than 
for the 37 companies but the rate realized on investment consider- 
ably lower. 

The share of the Federal Government in the distribution of profits 
in 1918-19 is quite as impossible to determine for this group as for 
the 37 companies. 

Exhibit I. 

Tonnage ofjlour — railroads of United States.^ 



Year ending June 30. 



Originating 
on road. 



Received from 
connecting 
roads and 

other carriers. 



Total. 



1910 2 

1911 

1912 

1913 

1914 

1915 

1916 

Dee. 31, 1916 
Dec. 31, 1917 



Tons. 
8,03S,684 
8, 446, 061 
8,451,197 
9,400,605 
9,568,383 
9,475,504 
10, 364, 918 
10,318,950 
10, 065, 219 



Tons. 
11,691,167 
10, 168, 164 
10,598,139 
11,579,459 
11,896,113 
12,185,017 
14,080,866 
14,101,475 
14,622,347 



Tons. 
19, 729, 851 
18,614,225 
19,049,336 
20,980,064 
21,464,496 
21,660,521 
24,445,784 
24,420,425 
24,687,566 



1 Statement compiled from the Annual Reports on the Statistics of Railways in the United States, by 
the Statistical Division of the Interstate Commerce Commission. 

- Includes returns for Classes I, II, and III roads, but excludes switctung and terminal companies. 
Returns for other years cover Class I roads only, representing originated tonnage in excess of 90 per cent 
of total. 



108 



COMMEKCIAL WHEAT-FLOUR MILLING. 

Exhibit II. 



Estimated percentages of soft and hard winter, soft and hard common spring, and durum 
tchcat groivn in the 36 leading wheat-producing States in the United States.^ 



(Crop of 1918.) 





Winter. 


Spring. 


State. 


Soft. 


Hard. 


Common. 


Durum. 




Soft. 


Hard. 




89 

100 

99 

100 

100 

100 

100 

100 

100 

100 

94 

94 

76 

85 

12 

1 

6 

94 






11 


















1 








































































Ohio 


5 

6 
22 

9 
10 

3 
30 

6 




1 














2 
6 

75 
92 
50 














3 






4 


Iowa 


12 


2 






North Dakota 




71 
78 
13 


29 






2 

SO 
85 




20 


Nebraska 


2 

15 

100 

100 

73 

16 

99 

3 


2 


3 


























25 
84 

1 
37 
25 
53 
14 
18 
22 

7 

22 

2 25 




1 


1 
















Montana 


5 
10 

5 
38 
44 
34 
67 

5 
12 


40 
37 
33 

2 
30 
12 

5 
16 

1 


15 


Wvoniing 


28 




4 
44 

6 
30 
21 
57 
62 





Utah 


2 




2 


Idaho 


2 



















1 Furnished by the Office of Cereal Investigations, Department of Agriculture. '^ Hard white. 

Exhibit III. 

Progress of population, wheat crop, and flour production for different sections indicated 
by percentage relations to totals for the United States. 



1899 



1904 



1909 



1914 



United States: 

Population 

Wheat crop ' bushels . . 

Flour production 2 barrels. . 

Wheat consumption by mills, 

bushels 

Northwestern Flour SelUng Area: 3 

Population per cent . . 

Wheat crop do 

Flour production do 

Wheat consumption by mills, 
per cent 



74,798,612 
621,277,375 
99, 763, 777 

471, 306, 986 

3.0 
20.6 
23.9 

23.0 



82,601,384 
620,094,787 
104,013,278 

494, 095, 083 

3.2 
21.4 
24.4 

23.8 



90.691,354 
660, 689, 420 
105,756,645 

496,480,314 

3.3 
22.6 
23.6 

23.1 



98,784,340 
794,888,000 
116,403,770 

545, 728, 431 

3.4 
22.7 
25.9 

25.4 



877, 895 
580, 667 
156,373 



539, 058, 000 

3.5 
17.4 
26.8 

27.0 



1 Average of three years' crops ending with given year. 

2 Flour production figures are for merchant mills as reported by the Census Bureau for 1899, 1904, 1909, 
and 1914; Grain Corporation's estimates for 1919. 

3 Montana, North Dakota, and Minnesota. 



COSTS, PRICES, AND PROFITS. 



109 



Progress of population, wheat crop, and flour production for different sections indicated 
by percentage relations to totals for the United States — Continued. 



Southwestern Flour Selling Area: * 

Population per cent . . 

Wheat crop do... 

Flour production do. . . 

Wheat consumption by mills, 

per cent 

Pacific Flour Selling Area: * 

Population per cent . 

Wheat crop do . . . 

Flour production do. . . 

Wheat consumption by mills, 

per cent 

Eastern Flour Buying Area: ' 

Population per cent . 

Wheat crop do... 

Flour production do. . . 

Wheat consumption by mills, 

per cent ". 

Southern Flour Buying Area: ' 

Population per cent.. 

Wheat crop do . . . 

Flour production do . . . 

Wheat consumption by mills, 

per cent 

Central Neutral Area: ^ 

Population • per cent . . 

Wheat crop do 

Flour production do 

Wheat consumption by mills, 

per cent 

Southeastern Neutral Area: ^ 

Population per cent . . 

Wheat crop do 

Flour production do 

Wheat consumption by mills, 

per cent 

California (Western Neutral Area): 

Population per cent . . 

Wheat crop do 

Flour production do 

Wheat consumption by mills, 

per cent 

Colorado (Western Neutral Area): 

Population per cent . . 

Wheat crop do 

Flour production do 

Wheat consumption by mills, 

per cent 

Eastern Small Production Area: 'o 

Population per cent . . 

Whea t crop do 

Flour production do 

Wheat consumption by mills, 

per cent 

Western Small Production Area: " 

Population per cent . . 

Wheat crop do 

Flour production do 

Wheat consumption by mills, 

per cent 



1899 



8.5 
18.0 
12.9 

13.0 

1.4 
7.2 
3.9 



27.0 
6.6 
10.6 

10.5 

19.8 
3.2 
4.5 



24.5 
30.0 
30.7 



9.9 
7.5 



9.0 

2.0 
4.4 
2.7 

2.7 

.7 

.9 

1.0 

1.0 

2.2 
.2 
.3 



1.0 
1.4 

.7 

.7 



1904 



8.5 
26.4 
16.8 

16.9 

1.8 
7.3 
4.9 



27.4 
5.9 
10.2 

10.1 

19.8 
3.9 
4.9 

5.0 

23.8 
24.4 
26.2 



9.4 
5.1 
8.3 

8.4 

2.2 
3.3 
2.4 



1.0 
.9 



2.0 
.3 
.3 



1.1 
1.0 

.7 



8.5 
24.2 
19.9 

19.6 

2.3 
8.9 
4.3 



27.8 
6.0 
10.8 



19.7 
2.4 
4.6 



23.0 
25.8 
24.9 

25.2 

8.9 

5.r. 

8.4 

8.7 

2.5 
1.9 
1.7 

1.8 

.9 
1.1 



1.9 
.3 
.2 



1.2 
1.2 



.7 



1914 


1919 


8.5 
30.8 
19.5 


8.6 
27.1 
22.0 


19.5 


21.8 


2.6 
10.3 
5.3 


2.9 
7.9 
7.2 


5.3 


7.2 


28.0 
4.3 
11.3 


28.3 
5.0 
9.8 


11.2 


9.7 


19.7 
3.0 
4.9 


19.6 
4.3 

4.8 


4.9 


4.8 


22.4 
20.2 
21.8 


21.8 
27.8 
17.9 


22.0 


18.0 


8.6 
4.9 

7.8 


8.2 
5.2 
6.7 



2.8 
. 7 
1.5 

1.8 

.9 
1.3 
1.1 



1.8 
.3 



1.3 
1.5 



.7 



3.0 
1.3 
2.6 



1.0 
1.8 
1.2 

1.2 

1.7 
.3 



1.4 
1.9 



< Nebraslca. Kansas, Missouri, and Oklahoma. 
' Washington, Oregon, and Idaho. 

6 Massachusetts, Rhode Island, Connecticut, New York, New Jersey, Pennsylvania, and West Virginia. 
'North Carolina, South Carolina, Georgia, Florida, Alabama, Mississippi, Louisiana, Arkansas, and 
Texas. 

8 South Dakota, Iowa, Wisconsin, Illmois, Michigan, Indiana, and Ohio. 
' Kentucky, Teimessee, Virginia, Distnet of Columbia, and Maryland. 
"> Delaware, New Hampshire, Maine, and Vermont. 
" Utah, Wyoming, New Mexico, Arizona, and Nevada. 



110 COMMERCIAL WHEAT-FLOUR ■ MILLING. 

Exhibit IV. 

MILLERS' ASSOCIATIONS AND MILLERS' CLUBS. 

Millers' National Fedeuation. 

officers. 

President, A. L. Goetzmann, La Crosse, Wis. 

First vice president, C. M. Hardenbergh, Kansas City, Mo. 

Second vice president, Henry M. Allen, Troy, Ohio. 

Treasurer, W. L. Phelps, Chicago, 111. 

Secretary, A. P. Husband, Chicago, HI. (160 West Jackson Boulevard). 

EXECUTIVE COMMITTEE. 

Officers named above and the following: 

E. C. Andrews, Kehlor Flour Mills Co., St. Louis, Mo., chairman committee on grain 
standardization and inspection. 

B. W. Marr, chairman committee on finance and membership. 

William G. Crocker, chairman sjiecial legislative committee on commercial feeding 

stuffs law. 
Franklin Edwards, Marshall Milling Co., Marshall, Minn., chairman committee on 

crop improvements. 

C. B. Jenkins, chairman committee on millere' mutual insurance. 
Thomas L. Moore, chairman committee on legislation. 

Charles T. Olson, Bay State Milling Co., Winona, Minn., chairman committee on 
package differentials, sales contracts, trade-marks, publicity. 

B. J. Rothwell, Bay State Milling Co., Boston, Mass., chairman committee on export 
trade. 

Fred N. Rowe, Valley City Milling Co., Grand Rapids, Mich., chairman committee 
on arbitration. • 

James C. Andrews, Yerxa, Andrews & Thurston (Inc.), Minneapolis, Minn., chair- 
man committee on transportation. 

EXPORT AGENT. 

F. H. Price, New York, N. Y. 

OFFICIAL COUNSEL. 

Frank F. Reed and Edward S. Rogers, Chicago, 111. 

BOARD OF DIRECTORS. 

Chauncy Abbott, jr., Omaha Flour Mills Co., Omaha, Nebr. 

C. H. Bell, Quaker City Flour Mills Co., Philadelphia, Pa. 
Henry M. Allen, Allen & Wheeler Co., Troy, Ohio. 

C. R. Anderson, Red River Milling Co., Fergus Falls, Minn. 
T. S. Blish, Blish Milling Co., Seymour, Ind. 

G. A. Breaux, Ballard & Ballard Co., Louisville, Ky. 
Wm. G. Crocker, Washburn-Crosby Co., Minneapolis, Minn. 
Guy W. Everett, Everett, Aughenbaugh & Co., Waseca, Minn. 
O. D. Fisher, Fisher Flouring Mills Co., Seattle, Wash. 

J. L. Grigg, Eagle Milling Co., Sjjarta, 111. 

C. M. Hardenbergh, Southwestern Milling Co., Kansas Citj', Mo. 

W. L. Harvey, New Prague Flouring Mill Co., New Prague, Minn. 

H. S. Helm, Russell-Miller Milling Co., Minneapolis, Minn. 

J. B. Hupp, Kansas Flour Mills Co., Wichita, Kans. 



COSTS, PRICES, AND PROFITS. Ill 

C B. Jenkins, Noblesville Milling Co., Noblesville, Ind. 

E. M. Kelly, Liberty Mills, Nashville, Tenn. 

Joseph J^e Compte, Lexington Roller Mills, Lexington, Ky. 

A. C. Loring, Pillsbury Flour Mills Co., Minneapolis, Minn. 

B. W. Marr, Gwinn Milling Co., Columbus, Ohio. 

S.' B. McNear, Sperry Flour Co., San Francisco, Calif. 

A. Mennel, Mennel Milling Co., Toledo, Ohio. 
George S. Milnor, Sparks Milling Co., Alton, 111. 
Thomas L. Moore, Dunlop Mills, Richmond, Va. 

W. L. Phelps, Star & Crescent Milling Co., Chicago, IlL 
E. S. Rea, Rea-Patterson Milling Co., Coffeyville, Kans. 
Charles L. Roos, Hunter Milling Co., "Wellington, Kans. 

B. B. Sheffield, Big Diamond Mills Co., Minneapolis, Minn. 
Oeorge G. Sohlberg, Acme Milling Co., Oklahoma City, Okla- 
Walter Stern, Bernhard Stern & Sons, Milwaukee, Wis. 

D. E. Stott, David Stott Flour Mills, Detroit, Mich. 

George P. Urban, The George Urban Milling Co., Buffalo, N. Y. 

• EX OFFICIO (ex-presidents). 

B. A. Eckhart, B. A. Eckhart Milling Co., Chicago, 111. 
Charles Espenschied, St. Louis, Mo. 
W. E. Castle, St. Louis, Mo. 

Dwight M. Baldwin, Baldwin Flour Mills, Minneapolis, Minn. 
Hosea B. Sparks, Sparks Milling Co., Alton, 111. 
Mark N. Mennel, Mennel Milling Co., Toledo, Ohio. 
Samuel Plant, Geo. P. Plant Milling Co., St. Louis, Mo. 
Fred J. Longham, Federal Milling Co., Lockport, N. Y. 

E. M. Kelly, Liberty Mills, Nashville, Tenn. 

Community Millers' Association of America. 



President, C. W. Bransford, Owensboro, Ky. 
Vice president, Geo. W. Ring, Edinburg, Va. 
Secretary and treasurer, E. H. Sherwood, 230 South Wells Street, Chicago, lU. 



board of governors. 



C. W. Bransford, Owensboro, Ky. 
J. K. Chapman, Enid, Okla. 
R. D. Collins, Windom, Minn. 
Pliny Gratz, Tecumseh, Mich. 
C. D. McArthur, Elgin, 111. 
S. B. Ray, Gamaliel, Ky. 
Geo. W. Ring, Edinburg, Va. 
S. S. Stevenson, Arcanum, Oliio. 
H. G. Young, Zanes\ille, Ohio. 



Association of Operative Millers. 
officers. 



President, P. H. Lawson, St. Joseph, Mo. 
Vice president, E. M. Friend, Terrell, Tex. 
Treasurer, W. C. Dimn. Independence, Mo. 
Secretary, Hugo Roos, Kansas City, Mo. 



112 COMMERCIAL WHEAT-FLOUR MILLING. 



EXECUTIVE COMMITTEE. 

Above-named officers and the following: 
C. H. Barnard, Wellington, Kans. 
F. J. Becker, Dickinson, Tex. 
Louis R. Henkle, Lawrenceburg, Ind. 

A. W. Spehr, St. Paul, Minn. 

B. C. Williams, Detroit, Mich. 
Frank 0. Witter, Denver, Colo. 

The Millers' Export Association (Inc.). 

[Activities discontinued.] 

OFFICERS. 

President, W. L. Sparks, Sparks Milling Co., Terre Haute, Ind. 
First vice president, Chas. L. Roos, Himter Milling Co., Wellington, Kans. 
Second vice president and general manager, R. F. Bailsman, Millers' Export Asso- 
ciation (Inc.), 105 Produce Exchange, New York, N. Y. 
Treasurer, Frank F. Henry, Washburn-Crosby Co., Buffalo. N. Y. 
Secretary, Chauncy Abbot, jr., Omaha Flour Mills Co., Omaha, Nebr. 
Assistant Secretary, Alex. Pound, Millers' Export Association (Inc.), New York, N. Y. 

DIRECTORS. 

H. S. Hehn, Russell-Miller MilKng Co., Minneapolis, Minn. 
Frank B. Rice, Star and Crescent Milling Co., Chicago, 111. 

C. Powell Smith, J. Allen Smith & Co., Knoxville, Tenn. 

ZONE EXECUTIVE COMMITTEES. 

Eastern zone: 

Geo. P. Urban, chairman, George Urban Milling Co., Buffalo, N. Y. 

Fred E. Pond, zone manager. Chamber of Commerce, Buffalo, N. Y. 

J. G. Davis, J. G. Davis Co.. Rochester, N. Y. 

W. B. Hamilton, William Hamilton & Son, Caledonia. N. Y. 

F. J. Lingham, Federal Milling Co., Lockport, N. Y. 

B. J. Rothwell, Bay State Milling Co., Boston, Mass. 
Southern zone: 

J. W. Morrison, chairman and zone manager, Ijcxington Roller Mills, Lexington, 
Ky. 

E. M. Kelly, Liberty Mills, Nashville, Tenn. 

I.e. Klepper, Loui3\ille Milling Co., IiOiiis\'ine, Ky. 

E. E. Lawrance, Dunlop Milling Co., Clarksville, Tenn. 

J. W. Ring, Model Mills, Johnson City, Tenn. 
Central zone: 

T. S. Blish, chairman. Blish Milling Co., Seymour, Ind. 

L. E. Rice, zone manager, Star and Crescent Milling Co., Chicago, 111. 

Geo. A. Amendt, Amendt Milling Co.. Monroe, Mich. 

A. V. Imbs, Imbs MilHng Co., St. Louis, Mo. 

L. A. Mennel, Mennel Milling Co., Toledo, Ohio. 
Zone 3 has been subdivided. Mills in Michigan, Indiana, Ohio, and West Virginia 
are imder the direction of Zone Manager H. G. Spear, Comstock Building, Colum- 
bus, Oliio. 
Northwestern zone: 

J. S. Pillsbury, chairman, Pillsbury Flour Mills Co., Minneapolis, Minn. 

Dwight M. Baldwin, zone manager, Baldwin Flour Mills, Minneapolis, Minn. 

C. C. Bovey, Washburn-Crosby Co., Minneapolis, Minn. 



COSTS, PRICES, AND PROFITS. 113 

W. L. Harvey, International Milling Co., New Prague, Minn. 

B. B. Sheffield, Big Diamond Milling Co., Minneapolis, Minn. 
SouthweKtorn zone: 

J. B. Hupp, chairman, Kansas Flour Mills Co.. Wichita, Kans. 

C. V. Topping, zone manager, 907 New York Life Building, Kansas City, Mo. 
W. B. Dunwoody, Brand-Dunwoody Milling Co., Joplin, Mo. 

J. C. Mytinger, Wichita Mill & Elevator Co., Wichita Falls, Tex. 

H. G. Randall, Midland Milling Co., Kansas City, Mo. 

T. C. Thatcher, Oklahoma City Mill & Elevator Co., Oklahoma City, Okla. 

National Federated Flour Clubs. 



President. Samuel Knighton, New York, N. Y. 

Vice president, F. W. Blazy, Cleveland, Ohio. 

Secretary, Fred W. Colquhoun, Chicago, 111. 

Assistant secretary and treasurer, Walter Quackenbush, New York, N. Y. 

Millers' Exchange (Kansas City, Mo.). 
Attorney in fact and general manager, Charles F. Rock, Kansas City, Mo, 

OFFICERS. 

Chairman, G. G. Sohlberg, Oklahoma City, Okla. 
Vice chairman, Aug. J. Butte, Kansas City, Mo. 
Treasurer, J. B. Hupp, Wichita, Kans. 
Secretary, H. Dittmer, El Reno. Okla. 

ADVISORY COMMITTEE. 

Above-named officers and t'le following: 
Chauncy Abbott, jr., Omaha, Nebr. 
R. Sam Hays, Sweet Springs, Mo. 
Theo. Ismert, Kansas City, Mo. 
S P. Kramer, Topeka, Kans. 
Geo. S. Milnor, Alton, 111. 
John H. Moore, Wichita, Kans. 
Chas. L. Roos, Wellington, Kans. 

The Southwestern Millers' League. 

officers. 

President, L. E. Moses, Kansas City, Mo. 

First vice president, Frank Kell, Wichita Falls, Tex. 

Second vice president, S. P. Kramer, Topeka, Kans. 

Treasurer, H. G. Randall, Kansas City, Mo. 

Secretary-traffic manager, C. V. Topping, 907-908 New York Life Building, Kansas 

City, Mo. 
Chairman of traffic committee, H. Dittmer, El Reno, Okla. 
Commerce counsel, E. H. Hogueland. 
183256°— 20 8 



114 COMMERCIAL WHEAT-FLOUR MILLING. 

DIRECTORS. 

Chauncy Abbott, jr., Omaha, Nebr. 

C. L. Aller, Crete, Nebr. 

T. P. Duncan, Waco, Tex. 

J. W. Graver, St. Joseph, Mo. 

S. W. Gladney, Sherman, Tex. 

J. R. Forsyth, Denver, Colo. 

F. S. Gresham, Guthrie, Okla. 

E. R. Lehman, Geary, Okla. 

J. K. Mullen, Denver, Colo. 

L. S. Meyer, Springfield, Mo. 4 

C. L. Roos, Wellington, Kans. 

O. W. Wasmer, Concordia, Kans. 

Southeastern Millers' Association. 



President, E. M. Kelly, Nashville, Tenn. 

First vice president, T. S. Blish, Seymour, Ind. 

Second vice president, Joseph Le Compte, Lexington, Ky 

Treasiu-er, E. A. Lindsey, Nashville, Tenn. 

Secretary, J. B. McLemore, Nashville, Tenn. 

EXECUTIVE committee. 

G. A. Breaux, chairman, Louisville, Ky. 

E. P. Bronson, Chester, 111. 
W. A. Dale, Columbia, Tenn. 

C T. Johnson, Mount Vernon, Ind. 
R. M. McCombs, Jackson, Mo. 
C. P. Smith, Knoxville, Tenn. 

F. A. Witt, Morristown, Tenn. 

North Pacific Millers' Association, 

officers. 

President, O. D. Fisher, Seattle, Wash. 

Vice president, E. O. McCoy, The Dalles, Oreg. 

Secretary, W. C. Tiffany, Seattle, Wa^h. 

South Pacific Millers' Association. 

officers. 

President, R. D. Joyce, Los Angeles, Calif. \ 

Vice president, Ellis Hart, Petaluma, Calif. 

Secretary and treasui-er, R. C. Mason, San Francisco, Calif. 

directors. 

R. D. Joyce, H. Levi, Gay Lombard, G. A. Raymer, Max Viault. 



Illinois: Southern Illinois Millers' Association. Secretary and treasiu-er, J. L. Grigg, 

Sparta, 111. 
Indiana: Indiana Millers' Association. Secretary and treasiu'er, Charles B. Riley, 

Indianapolis, Ind. 



COSTS, PRICES, AND PROFITS. 115 

Kansas: Southern Kansas Millers' Club. Secretary, F. D. Stevens, Wicliita, Kans. 
Kentucky: Central Kentucky Millers' Association. Secretary and treasurer, John D. 

Allen, Lexington, Ky. 
Michigan: Michigan State Millers' Association. Secretary, F. B. Drees, Lansing, 

Mich. 
Minnesota: 

Southern Minnesota Mills. C. E. Vandenover, Minneapolis, Minn. 
Minnesota Millers' Club. Secretary, L. H. Pinney, Minneapolis, Minn. 
Missouri: Southwestern Missouri Millers' Association. Secretary, J. S. Flautt, 

Aurora, Mo. 
Montana: Montana Millers' Association. Secretary and treasurer, S. B. Fairbank, 

Hobson, Mont. 
Nebraska: Nebraska Millers" Association. Secretary, J. N. Campbell, Omaha, Nebr. 
New York: New York State Millers' Association. Secretary, Fred E. Pond, Buffalo, 

N. Y. 
Ohio: Ohio Millers State Association. Secretary and treasurer, Frank H. Tanner, 

Columbus, Ohio. 
Oklahoma: Oklahoma Millers' Association. Secretary and treasurer, Gerome V. 

Tbpping, Oklahoma City, Okla. 
Pennsylvania: 

Pennsylvania Millers' State Association. Secretary, J. F. Isenberg, Hunting- 
ton, Pa. 
Pennsylvania Millers' Export Association. Secretary, Thomas K. Sharpless, 
524 Bourse Building, Philadelphia. 
South Dakota: South Dakota and Southwestern Minnesota Millers' Club. Secretary 

and treasurer, Charles A. Lum, Aberdeen, S. Dak. 
Utah, Idaho: Utah-Idaho Millers' and Grain Dealers' Ass )ciation. Secretary, Hyrum 

Bennion, jr., Murray, Utah. 
Tennessee: Southeastern Millers' Association. Secretary, J. B. McLemore, Nash- 
ville, Tenn. 
Virginia: Virginia Wheat Millers' Club. Secretary, M. Kivlighan, Staunton, Va. 
Wisconsin: Wisconsin State Millers" Association. Secretary and treasurer, C. H. 

Hooker, Wausau, Wis. 
Baltimore Flour Club. Secretary, R. E. McCosh. 
Boston Flour & Grain Club. Secretary and treasiu-er, Seth Catlin, jr. 
Buffalo Flour Club. Secretary and treasurer, F. A. Dirnberger. 
Chicago Floiir Men's Club. Secretary and treasurer, Fred W. Colquhoun. 
Cleveland Flour Club. Secretary, C. W. Fairchild. 
Kansas City Flour & Feed Club. Secretary, Robert E. Sterling. 
Kansas City Millers' Club. Secretary, Robert E. Sterling. 
Minneapolis: The Millers' Club. Secretary and treasurer, Robert T. Beatty. 
New York Floiu- Club (Inc.). Secretary, Walter Quackenbush. 
Philadelphia Floiu* Chib. Secretary, William J. Rardon. 

St. Louis, Flour Trade Association of. Secretary and treasurer, David N. Sosland. 
St. Louis Millers' Club. Secretary and treasurer, Frank E. E'chler. 
San Francisco Floiur Trade. Secretary and treasurer, W. F. Williama. 



116 



COMMERCIAL, WHEAT-FLOUE MILLING. 

Exhibit V. 



Proportion of hard and soft wheat used by certain mills in different localities, crop year 

1916-17. 



Location. 


Hard 
wheat. 


Soft 
wheat. 


Location. 


Hard 

wheat. 


Soft 
wheat. 


Minnesota mills: 

1 


Per ct. 
100 
100 
100 
100 
100 
100 
100 
100 
100 
98 
100 


Per ct. 
2 


Mills east of the MississippiRiver: 
1 


Per ct. 
65 
67 

67 
30 


Per ct. 
35 


2 


1 


33 


3 


3 


33 


4 


4 


70 


51 


5 


100 


6 


6 


17 

15 

100 

70 

90 

100 

100 

100 

67 

88 

85 

30 

30 

15 


83 


7 


7 


85 


8 


8 




9 


9 


30 


10 1 


10 


10 


HI 


Ill 






19 1 




Average for group 


2 100 




13 






14 


■i-] 


Kansas and Missouri mills: ' 


100 
100 
33 
67 
100 
100 
100 
100 


67 

33 

........ 

ioo 

2 

6 

25 

20 
70 
20 


151 


12 


1 


16' 


15 


2 ... .... 


17 1 


70 


3 


18 


70 


4 


19 


85 


5 


20 


100 


61 


Average for group 






7 


49 


51 




Washington and Oregon mills: 
1 




9 






10 


98 
100 
100 
94 
100 
75 
80 
30 
80 


100 




2 


25 
10 
70 
50 
25 
5 


75 


121 


3 


90 




4 


30 


11 


5 


50 




6 


75 


16 


7 


95 




Average for group 




181 


15 


85 








Average for group 


88 


12 









1 Crop year 1917-18. 

» Exact average, 99.059. Three or four of these mills reported that in years when the hard- wheat supply 
was short and of poor quality they tiad used as much as 15 per cent of soft wheat. The results were 
unsatisfactory. 

» Including one Oklahoma milL 



COSTS, PRICES, AND PROFITS. 

Exhibit VI. 

QvxiUty and weight of wheat by States, crop years 1912-1918} 



117 



Quality (per cent of normal). 



1912 1913 1914 1915 1916 1917 1918 



Weight per measured bushel 
(pounds). 



1912 1913 1914 1915 1916 1917 1918 



United States. 



93.2 



87.0 



92.4 



58.7 



58.0 



57.9 



Northwestern Flour Selling 
Area: 

Montana 

North Dakota 

Minnesota 

Southwestern Flour Selling 
Area: 

Nebraska 

Kansas 

Missouri 

Oklahoma 

Pacific Flour Selling Area: 

Washington 

Oregon 

Idaho 

Eastern Flour Buying Area: 

Massachusetts 

Rhode Island 

Connecticut 

New York 

New Jersey 

Pennsylvania 

West Virginia 

Southern Flour Buying 
Area: 

North Carolina 

South Carolina 

Georgia 

Florida 

Alabama 

Mississippi 

Louisiana 

Arkansas 

Texas 

Central Neutral Area: 

South Dakota 

Iowa 

Wisconsin 

Illinois 

Michigan 

Indiana 

Ohio 

Southeastern Neutral Area: 

Kentucky 

Tennessee 

Virginia 

District of Columbia. . . . 

Maryland 

California 

Colorado 

Eastern Neutral Small Pro- 
duction Area: 

D elaware 

New Hampshire 

Maine 

Vermont 

Western Neutral Small Pro- 
duction Area: 

Utah 

Wyoming 

New Mexico 

Arizona 

Nevada 



92 



60.1 
58.0 
57.0 



59.6 
58. 1 
59.2 
57.0 

59.0 
60.1 
59.9 



59.7 
54.5 
53.1 



59.2 

5.8. 
59.0 
59, 

59. 

59.4 

59.7 



60.5 
58.0 
58.0 



5' 

.56. 



59.3 
58.9 

59-. 8 



59.1 
46.8 
49 



59.8 
58.0 
56.5 
58.7 

59.8 
60.6 

59.7 



59.5 
.59.0 
59. 
59.0 



.59.5 
59.5 

58.8 



59.7 
59.0 
.59. 
59.9 



59.5 
59.5 

58.7 



.59.6 
59. 
59.9 
60.2 



59.1 
59.6 

58.2 



58.5 
59.1 
59.5 
59.6 



.59.0 
59.5 

58.6 



58.5 
58.3 



59.0 
59.2 



58.7 
58. 6 



58.2 
56.5 



58.5 
58.0 

58.0 
58.3 
58.9 
59.0 
58.8 
58.5 
59.0 

59.0 
59.0 
59.5 



58.0 
56.0 

52.9 
57.9 
56.9 
58.7 
59.5 
59.3 
59.3 

.59.4 
59.0 
59.1 



57.0 
57.6 

57, 

57 

59.9 

57.5 

58.5 

57.4 

58.5 

57.5 
58.0 
60.4 



57.8 
58.2 

47.9 
57.3 
57.1 
.57.0 
58.4 
57.1 
58.5 

58.0 
57.0 
59.5 



59.5 6;).0 
58. 59.2 
59.4 59.1 



60.0 



60.5 
59.0 



6 J. 5 

.57.5 
58. 9 



5J.0 
59.0 
59.3 



58.2 
58.6 
68.0 



58.8 
57 

58.8 
58.5 

57.1 
58.3 

58.5 



59.3 
59.6 
58.2 



57.9 

58.0 
59.0 

58.8 

57.1 
58.9 
59.3 



59.5 
59.1 
59 
59 



59.8 
59.4 
58.6 



59.6 
59.5 
60.0 
59.9 



57.0 
59.2 
58.5 



58.3 
58.2 



58.2 
.57.0 



58.1 
59.0 

58. 3 

58.0 
59.1 
57.8 
58.9 
58.3 
59.0 

58.7 
58.4 
59.0 



57.0 
58.0 

58.8 
58.1 
59.0 
59.1 
59.4 
58.9 
59.5 

58.6 
58.0 
59.0 



59.1 
59.2 
59.5 



60.0 
58.2 
58.0 



60.0 
59.0 



61.6 60.6 

60.2 59.9 
59.5! .59.5 
61.0 60.2 

60.3 59.8 



61.0 
59.5 



61.0 
60.4 
58.6 
59.0 
60.4 



.58.5 58. 
58.5 58.0 



60.0 
59.0 



60.9 59.7 60.5 

59. o; 60. 1 60. 

59.5 59.6 58.7 

58.5 58.5 60.0 

59. 4 60. 59. 7 



» Data furnished by the Department of Agriculture. 



118 



commercial wheat-flour milling. 
Exhibit VIT. 



Analyses of the cost of making and selling a barrel of wheat flour, by groups and by years, 

1913-14 to 1917-18. 



NORTHWESTERN GROUP. 



Items of cost. 


1913-14 


1914-15 


1915-16 


1916-17 


1917-18 


Wheat 


$3.90 
.27 
.20 
.30 


S5.52 
.23 
.21 
.34 


S4.99 
.25 
.20 
.31 


$8.55 
.32 
.26 
.44 

9.57 
1.28 


$9 61 




46 




37 


General and selling expense 


.42 






Total cost of flour and feed 


4.67 
.71 

3.98 


6.30 

.82 

5.48 


5.75 
.74 


10 86 


Charged to production of feed 


1.25 






Net cost of flour per barrel ' 


5.01 


8.29 


9.61 






Mill operating costs: 

Mill labor, power, and miscellaneous operating 
costs 


.15 
.02 
.03 


.15 
.03 
.03 


.15 
.02 
.03 


.20 
.03 
.03 


28 




.06 


Depreciation ' 


.03 






Total 


.20 


.21 


.20 


.26 


.37 






Total operating, general and selling costs ' 


.50 


.55 


.51 


.70 


.79 



SOUTHWESTERN GROUP. 



Wheat 


$3.90 
.26 
.26 
.25 


«4.90 
.22 
.25 
.2.5 


$4.97 
.22 
.25 
.24 


$7.56 
.28 
.28 
.31 


$9.77 


Packages 


.48 




.36 


General and selling expense 


.36 


Total cost of flour and feed 


4.67 
.83 


5.62 
.83 


5.68 
.82 


8.43 
1.15 


10.97 


Charged to production of feed 


1.37 






Net cost of flour per barrel ' 


3.84 


4.79 


4.86 


7.28 


9.60 






Mill operating costs: 

Mill labor, power and miscellaneous operating 


.20 

.02 
.04 


.19 
.02 
.04 


.19 
.02 
.04 


.21 
.03 
.04 


,27 


Repairs 


.05 




.04 






Total 


.26 


.25 


.25 


.28 


.36 






Total operating, general and selling costs < 


.51 


.50 


.49 


.59 


.72 



EASTERN GROUP. 



Wheat 


$4.28 
.29 
.27 
.34 


$5.50 
.25 
.25 
.32 


$5.63 
.25 
.25 
.35 


$8.16 
.32 
.34 
.44 


$10.15 


Packages 


.47 




.37 


General and selling expense 


.41 






Total cost of flour and feed 


5.18 
.93 


6.32 
.94 


6.48 
.90 


9.26 
1.29 


11.40 


Charged to production of feed 


1.39 






Net cost of flour per barrel i 


4.25 


5.38 


5.58 


7.97 


10.01 






Mm operating costs: 

Mill labor, power and miscellaneous operating 


.21 
.02 
.04 


.19 
.02 
.04 


.19 
.02 
.04 


.27 
.03 
.04 


.28 




.05 


Depreciation ' 


.04 






Total 


.27 


.25 


.25 


.34 


.37 






Total operating, general and selling costs * 


.61 


.57 


.60 


.78 


.78 



' Based on barrels of flour produced. 

> Actual figures, Northwestern group, $0.0284; Southwestern group, $0.0361; Eastern group, $0.0420. 

» These costs do not include interest charges amounting to 2 cents in 1914, 3 cents in 1915, 2 cents in 1918, 
4 cents in 1917, and 3 cents in 1918. 

* These costs do not include interest charges amounting to 3 cents in 1914, 2 cents in 1915, 2 cents in 1916, 
4 cents in 1917, and 4 cents in 1918. 

' These costs do not include interest charges amounting to 4 cents in 1914, 4 cents in 1915, 3 cents in 1916, 
7 cents in 1917, and 5 cents in 1918. 



o 



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019 344 163 4 



